Federal Bank profit dips in Q1 on increased provisions; net interest income up by 2%

The Federal Bank on Saturday reported a 15 per cent decline in its first quarter profit, which fell to ₹862 crore from ₹1,010 crore in the same period last year, impacted by a sharp rise in provisions.

The Aluva-based lender also posted a modest 2 per cent growth in Net Interest Income (NII), which rose to ₹2,337 crore from ₹2,297 crore in the first quarter last year. However, its net interest margin (NIM) declined to 2.94 per cent from 3.16 per cent a year earlier.

The bank's profit for the quarter was affected by a 41 per cent increase in provisions, which rose to ₹695 crore compared to ₹491 crore in the same period last financial year. In a press conference, the bank said that despite strong performance in other operational metrics, higher provisions during the quarter weighed heavily on profits. Provisions are funds that banks set aside to cover potential losses from bad loans or other risks.

Federal Bank's operating profit for the quarter rose by 4 per cent to ₹1,556 crore, marking a 6 per cent increase compared to the previous quarter. The lender also reported a 7.64 per cent growth in total income, which reached ₹7,799.61 crore.

The total deposits with the bank reported an 8 per cent growth in the quarter to ₹2.87 lakh crore as against the ₹2.66 lakh crore in the same period last year. Of this, the NRE deposits grew by 10 per cent. 

The bank reported a significant improvement in asset quality, with gross non-performing assets (GNPA) declining to 1.91 per cent this quarter from 2.11 per cent a year earlier. The bank's earnings per share stood at ₹14.07.