Aluva-based Federal Bank announced its Q3 results late on January 27, reporting a mixed performance. While the bank achieved its highest-ever income, including net interest income, its profit witnessed a decline. Like many other banks in the industry, Federal Bank is grappling with margin pressures. However, the bank reported an improvement in asset quality, reflecting better management of bad loan risks.
Federal Bank reported a record total income of ₹7,725 crore in the quarter ending December 2024. Although revenue growth has slowed in recent quarters, it still recorded a respectable 17.17% year-on-year increase, despite a slowdown in credit growth across the industry. The bank also reported a record-high net interest income (difference between interest earned and interest paid) of ₹2,431 crore during the quarter.
Amid industry headwinds such as rising inflationary costs and intense competition for deposits, the bank’s profit for the quarter declined to ₹955 crore, down nearly 10% from the record profit of ₹1,057 crore reported in the previous quarter. Profit margin also fell to a three-year low of 12.37%.
Following the broader industry trend, the bank’s CASA ratio (the share of current account and savings account deposits in total deposits) slipped from 30.63% in December 2023 to 30.16% as of December 2024. CASA deposits are considered the lowest cost of funding for banks, and a decline indicates increased reliance on higher-cost deposits.
Despite worries of an increase in bad loans in the industry, Federal Bank’s Gross Non-Performing Assets (GNPA) improved to 1.95%, whereas Net NPA improved to 0.49%. The bank’s asset quality is now at its best in over a decade.
Federal Bank MD & CEO KVS Manian commented, “We have chosen to focus on granular retail deposit growth instead of high-value, expensive deposits. We have also consciously avoided low-yielding or high-risk assets for the sake of growth. Notwithstanding this disciplined approach, we have achieved a year-on-year growth of 15% in advances and 11% in deposits, positioning us competitively within the sector.”
As of December 31, 2024, the bank’s total business stood at ₹4,96,745 crore, comprising deposits of ₹2,66,375 crore and net advances (loans) of ₹2,30,370 crore. Federal Bank also expanded its network to 1,550 banking outlets, adding 46 new outlets during the financial year.
Despite the Nifty declining over 1% during the day’s trade, shares of Federal Bank gained 1.5%, closing at ₹191, as investors showed optimism ahead of the results.
