Federal Bank: Gathering More Strength

One of the largest bank based out of South India, Federal Bank, reported a 9.2% jump in its net profit on a yearly basis for the quarter ended December 2013, which stood at Rs 230.13 crore. This increase in the profit came in despite a muted performance of its Net Interest Income (NII) and a sharp fall in its other income. The NII of the bank has increased by just 9.7% on a YoY basis to Rs 545.57 crore for Q3FY14. Other income, which forms around 10% of its total income has come down by 23.4% on a yearly basis, from Rs 203.85 crore to Rs 156.25 crore. 

The factor that really helped the bank to improve its profit was a drastic decline in its provisions and contingencies, which were down by a huge 90% on a yearly basis and 34% on a quarterly basis. They stood at Rs 7.29 crore for Q3FY14.  Even gross and net non-performing assets (NPA) on an absolute basis have seen a fall, both on a Y-o-Y as well as on a Q-o-Q basis. Gross NPAs came down from Rs 1563.98 crore at the end of Q2FY14 to Rs 1200.89 crore for Q3FY14. During the same period, net NPAs have come down to Rs 356.26 crore from Rs 362.04 crore. 

Even as a percentage of its advances, Federal Bank has witnessed an improvement in its asset quality. Gross NPAs as a percentage of assets stood at 2.83% against 3.39% for the previous quarter and net NPAs came down by 12 basis points to stand at 0.86% for the recently concluded quarter. 

The good show of the bank on the asset quality front was reflected in the stock’s performance that saw a spike of almost 4% after the result announcement. Currently the stock is trading at Rs 81.65 and is nearly at its book value.