Federal Bank Q4 net profit jumps 22 pc; reports rise in remittances since West Asia war

Private sector lender Federal Bank on Wednesday reported a 22 per cent jump in its consolidated net profit in the March quarter of FY26 at Rs 1,341 crore, as against Rs 1,091 crore in the year-ago period. The bank had a one-time gain of Rs 456 crore on interest from Income Tax refund, but chose to create a floating provision of the same amount to take care of the additional provisions that will be required to transition towards the new provisioning framework. The RBI's new provisioning guidelines, which are expected to be implemented from April next year, would mandate lenders to make provisions for the expected credit loss. The Federal Bank management, however, did not share details of the quantum of additional provisions required to make the transition. Its core net interest income zoomed to Rs 3,173 crore from the Rs 2,337 crore recorded in the year-ago period. The interest income would have been Rs 2,717 crore if the income tax refund amount is excluded. The lender reported a 12 per cent growth in net advances, while its net interest margin expanded to 3.20 per cent, excluding the refund benefit from 3.18 per cent in the quarter-ago period. The bank's chief executive and managing director, K V S Manian, said that even without the one-time gain, this is the best quarter for the bank in terms of profits. Without giving an exact target on advances growth, he said the same momentum will continue. The corporate advances are likely to grow at around 10 per cent, Manian said, adding that the bank will focus on deriving revenues from other streams beyond loan growth in the segment. Manian said that the bank has consciously stayed away from home loans due to competitive intensity. Instead, it is focusing on growth in other higher-yielding segments, including credit cards. The bank does not expect a significant impact from the ongoing West Asia conflict, he said, adding that it has actually seen a spike in remittances in the short run since the war. He declined to specify the share of the Middle East in the overall remittances but added that the overall non-resident deposits have crossed the Rs 1 lakh crore mark this quarter. The bank, which is one of the largest remittances facilitators for the diaspora, said that there can be an impact to remittances if there are job losses, which have not happened till now, and are also unlikely in future, Manian said, adding that rebuilding efforts will require more people to migrate. It has not seen any impact on the borrower behaviour since the war began, he said. Also, gold loan book is holding up well despite volatilities in prices. A senior official said the overall loan-to-value ratio at the portfolio level is 54 per cent, offering it a good cushion. From an asset quality perspective, gross slippages came at Rs 474 crore as against Rs 435 crore in the preceding quarter and Rs 483 crore in the year-ago period, and the gross non-performing assets ratio improved to a decadal best of 1.60 per cent. The bank is targeting to launch 100 more branches to the present network of 757 outlets, and will focus on the metro and urban areas. The bank launched its wealth management business during the March quarter, but Manian declined to comment on speculation of being in the race to acquire businesses put on the block by foreign banks. ''We remain open-minded on inorganic opportunities,'' he maintained. When asked about the allegations of misconduct against bank officials during a recent event in Andaman and Nicobar Islands, Manian said 42 per cent of the bank's staff are women, and a thorough enquiry will be conducted on the same. The Federal Bank scrip closed 2 per cent down at Rs 284.70 apiece on the BSE on Wednesday, against a 0.79 per cent jump in the benchmark.

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