Federal Bank Ltd., a prominent financial institution, has announced remarkable financial results for the second quarter of 2023, surpassing market expectations with a substantial 14% increase in profitability. The bank attributed this impressive surge to robust ‘other income’ and a notable reduction in provisions. Notably, the bank’s net interest income met projections, accompanied by an improvement in margins to 3.16%.
Furthermore, Federal Bank reported significant growth in both advances and deposits. Year-on-year (YoY) advances increased by 21%, while quarter-on-quarter (QoQ) growth stood at 5%. In parallel, YoY deposit growth reached 23%, with a QoQ increase of 4.7%. This robust performance was underpinned by term deposits and an expansion of the bank’s retail and commercial banking segments, resulting in a CASA (Current Account Savings Account) ratio of 31.2%.
Federal Bank’s proactive measures led to a notable reduction in slippages, which decreased to Rs 3.7 billion. The decline in slippages was especially pronounced in the retail and agricultural sectors, leading to a substantial reduction in the Non-Performing Asset (NPA) ratio, which now stands at 2.3% for the quarter. The restructured book also saw a decline, settling at 1.3%.
For the second quarter of the fiscal year 2024 (Q2 FY24), Federal Bank reported a robust Return on Assets (RoA) and Return on Equity (RoE) at 1.4% and 15.7%, respectively. According to data provided by InvestingPro, the bank’s Price-to-Earnings (P/E) ratio is notably low at 3.01, signaling that the stock is trading at an attractive price relative to its earnings.
InvestingPro Tips indicate that Federal Bank remains a leading player in the banking industry and has maintained profitability over the past year. Notably, stockholders of the bank have enjoyed high returns on book equity.
The bank is expected to deliver a RoA/RoE of 1.3%/14.9% in the fiscal year 2025 (FY25), which has contributed to a ‘Buy’ rating for the stock.
