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Economic Times
5 days ago
- Business
- Economic Times
Federal Bank shares in focus after Q1 profit drops 15% YoY. Should you stay invested?
Federal Bank shares will be in focus on Monday, August 24, after the lender reported a 14.6% year-on-year (YoY) decline in standalone net profit to Rs 861.75 crore for the June quarter, compared to Rs 1,009.53 crore in the same period last year. ADVERTISEMENT Net interest income (NII) rose 2% YoY to Rs 2,336.83 crore from Rs 2,291.98 crore. Despite the profit decline, the bank posted its highest-ever other income of Rs 1,113 crore, up 21.6% YoY, while total income grew 7.6% to Rs 7,799.61 crore. Managing Director & CEO KVS Manian said the quarter 'reaffirmed the strength of our diversified model,' highlighting momentum in commercial banking, credit cards, and gold loans. 'Our mid-yielding engines are firing well too. We delivered a strong operating performance with improving productivity. Fee income hit a record high, and CASA ratios continued to improve steadily,' he added. Total deposits rose 8.03% YoY to Rs 2.87 lakh crore, while net advances increased by 9.24% to Rs 2.41 lakh crore. Retail advances grew 15.6% to Rs 81,047 crore, commercial banking loans surged 30.3% to Rs 25,028 crore, and corporate loans rose 4.5% to Rs 83,680 crore. Asset quality remained stable, with gross non-performing assets (NPAs) at 1.91% and net NPAs at 0.48%. The provision coverage ratio (excluding technical write-offs) stood at 74.41%. Manian noted that elevated credit costs during the quarter were largely due to slippages in the agriculture and microfinance (MFI) portfolios. He expects these slippages to moderate, leading to normalised credit costs going forward. ADVERTISEMENT Avendus has cut Federal Bank's target price to Rs 209 from Rs 216 but maintained an 'Add' rating. ADVERTISEMENT It expects RoA to bottom out at 1.0% due to NIM compression and has trimmed its credit growth estimate for FY26 to 10%, despite better liquidity. The bank is expected to continue focusing on system upgrades and operational improvements. NIM for FY26E is projected at 3.0%, aided by savings account rate values Federal Bank at 1.2x its June 2027 estimated adjusted book value (ABV), with a sum-of-the-parts (SOTP) valuation of Rs 17 for its subsidiaries FedFina and Ageas Federal. It also factors in a CAGR of 10.3% in EPS and 11.7% in ABV over FY25–27. ADVERTISEMENT Motilal Oswal Financial Services (MOFS) has reduced Federal Bank's target price to Rs 235 from Rs 250, while retaining a 'Buy' brokerage said NIM contraction was in line with expectations, but MFI stress remained evident in Q4 and worsened in Q1FY26, with peak slippages in May. Some improvement was seen in June and July. ADVERTISEMENT MOFS expects credit costs of 55 bps for FY26 and the cost-to-income ratio to remain in the mid-50s range. It has lowered earnings estimates by 7% for FY26 and 4% for FY27. For FY27, MOFS forecasts a RoA of 1.18% and RoE of 13%. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
5 days ago
- Business
- Time of India
Federal Bank shares in focus after Q1 profit drops 15% YoY. Should you stay invested?
Federal Bank shares will be in focus on Monday, August 24, after the lender reported a 14.6% year-on-year (YoY) decline in standalone net profit to Rs 861.75 crore for the June quarter, compared to Rs 1,009.53 crore in the same period last year. Net interest income (NII) rose 2% YoY to Rs 2,336.83 crore from Rs 2,291.98 crore. Despite the profit decline, the bank posted its highest-ever other income of Rs 1,113 crore, up 21.6% YoY, while total income grew 7.6% to Rs 7,799.61 crore. Managing Director & CEO KVS Manian said the quarter 'reaffirmed the strength of our diversified model,' highlighting momentum in commercial banking, credit cards, and gold loans. 'Our mid-yielding engines are firing well too. We delivered a strong operating performance with improving productivity. Fee income hit a record high, and CASA ratios continued to improve steadily,' he added. Deposits and Advances Total deposits rose 8.03% YoY to Rs 2.87 lakh crore, while net advances increased by 9.24% to Rs 2.41 lakh crore. Retail advances grew 15.6% to Rs 81,047 crore, commercial banking loans surged 30.3% to Rs 25,028 crore, and corporate loans rose 4.5% to Rs 83,680 crore. Live Events Asset Quality Asset quality remained stable, with gross non-performing assets (NPAs) at 1.91% and net NPAs at 0.48%. The provision coverage ratio (excluding technical write-offs) stood at 74.41%. Manian noted that elevated credit costs during the quarter were largely due to slippages in the agriculture and microfinance (MFI) portfolios. He expects these slippages to moderate, leading to normalised credit costs going forward. What should investors do? Here's what brokerages say Avendus Avendus has cut Federal Bank's target price to Rs 209 from Rs 216 but maintained an 'Add' rating. It expects RoA to bottom out at 1.0% due to NIM compression and has trimmed its credit growth estimate for FY26 to 10%, despite better liquidity. The bank is expected to continue focusing on system upgrades and operational improvements. NIM for FY26E is projected at 3.0%, aided by savings account rate cuts. Avendus values Federal Bank at 1.2x its June 2027 estimated adjusted book value (ABV), with a sum-of-the-parts (SOTP) valuation of Rs 17 for its subsidiaries FedFina and Ageas Federal. It also factors in a CAGR of 10.3% in EPS and 11.7% in ABV over FY25–27. Motilal Oswal Motilal Oswal Financial Services (MOFS) has reduced Federal Bank's target price to Rs 235 from Rs 250, while retaining a 'Buy' rating. The brokerage said NIM contraction was in line with expectations, but MFI stress remained evident in Q4 and worsened in Q1FY26, with peak slippages in May. Some improvement was seen in June and July. MOFS expects credit costs of 55 bps for FY26 and the cost-to-income ratio to remain in the mid-50s range. It has lowered earnings estimates by 7% for FY26 and 4% for FY27. For FY27, MOFS forecasts a RoA of 1.18% and RoE of 13%. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Economic Times
6 days ago
- Business
- Economic Times
Federal Bank Q1 Results: Standalone net profit falls 15% YoY to Rs 862 crore; NII up 2%
Federal Bank on Saturday reported a standalone net profit of Rs 861.75 crore, down 14.6% year-over-year compared to a profit of Rs 1,009.53 crore in the corresponding quarter of last year. ADVERTISEMENT The bank also posted a 2% increase YoY in net interest income (NII), which rose to Rs 2,336.83 crore in the June quarter from Rs 2,291.98 crore a year ago. Despite the drop in bottom line, the lender posted its highest-ever other income of Rs 1,113 crore, which was up 21.6% from the year-ago period. Total income for the quarter rose 7.6% year-on-year to Rs 7,799.61 crore. KVS Manian, Managing Director & CEO of the bank, said the quarter 'reaffirmed the strength of our diversified model.' He noted that 'even in a typically soft Q1, we saw momentum in key segments like commercial banking, credit cards, and gold loans.''Our mid-yielding engines are firing well too,' Manian said. 'We delivered a strong operating performance, with improving productivity. Fee income hit a record high, and CASA ratios continued to improve steadily.' ADVERTISEMENT The bank's total deposits grew 8.03% to Rs 2.87 lakh crore, while net advances increased by 9.24% to Rs 2.41 lakh crore. Within this, retail advances rose 15.6% to Rs 81,047 crore, commercial banking loans jumped 30.3% to Rs 25,028 crore, and corporate loans grew 4.5% to Rs 83,680 bank's CASA (current account and savings account) base expanded 12% YoY to Rs 87,236 crore. Net interest margin for the quarter stood at 2.94%, while annualised earnings per share came in at Rs 14.07. ADVERTISEMENT Asset quality remained stable, with gross non-performing assets (NPAs) at 1.91% and net NPAs at 0.48%. Provision coverage ratio (excluding technical write-offs) stood at 74.41%.Manian said that 'while credit costs were elevated this quarter, they were largely driven by slippages in the Agri and MFI portfolios.' He added, 'Based on current trends, we expect these slippages to moderate and stabilise going forward, leading to a normalisation in credit costs.' ADVERTISEMENT The lender's capital adequacy ratio for the June 2025 quarter stood at 16.03%, and net worth increased 12.2% YoY to Rs 33,994 crore. Return on assets (ROA) and return on equity (ROE) for the quarter stood at 1% and 10.3%, respectively. 'With macro tailwinds building and our strategic themes gaining traction, we're confident of accelerating growth in the second half while staying disciplined on risk and profitability,' Manian said. (You can now subscribe to our ETMarkets WhatsApp channel)
New Indian Express
6 days ago
- Business
- New Indian Express
Federal Bank net income falls 14.7% amid rising credit costs from MFI, agri books
MUMBAI: The Kochi-based old generation private sector lender Federal Bank has reported a 14.7% on-year dip in its net income at Rs 861.75 crore in the June quarter, down from Rs 1,010 crore a year ago, driven by rising credit costs in the microfinance and agri books. Sequentially, the numbers are worse with a drop of 16.31%. The key net interest income rose 1.96% to Rs 2,336.83 crore, while other income jumped to Rs 1,113 crore, up 21.6%, taking the total income up 7.64% to Rs 7,799.61 crore, the management led by chief executive KVS Manian told reporters in an earnings call Saturday. The asset quality was impacted by a 39 bps rise in credit costs to 65 bps from 26 bps in the year-ago period, largely driven by slippages in the agri and MFI portfolios. This has the total slippages rising by 1.1% in the quarter. "Based on current trends, we expect these slippages to moderate and stabilise going forward, leading to a normalisation in credit costs," Manian said. The bank added Rs 686 crore in fresh slippages, mostly from the microfinance and agri books. The total business of the bank grew 8.5% to reach Rs 5,28,640.65 crore, making it the sixth largest private sector lender. The total deposits were Rs 2,87,436.31 crore (of this the low-cost Casa base expanded 12% to Rs 87,236 crore), which grew 8.03%, and advances were Rs 2,41,204.34, which grew 9.24% during the quarter.
Time of India
6 days ago
- Business
- Time of India
Federal Bank net profit dips 14.6% to Rs 861 crore on MFI provisions
MUMBAI: A sharp increase in provisions pulled down quarterly profit at Federal Bank, India's sixth-largest private lender, even as asset quality and core earnings improved. Net profit declined 14.6% to Rs 861.8 crore in the quarter ended June 30, 2025, from Rs 1,009.5 crore a year earlier. The fall in profit was driven by a 177.4% surge in provisions and contingencies, excluding tax, which rose to Rs 400.2 crore from Rs 144.3 crore in the year-ago quarter. The rise in provisioning, largely linked to the agri and microfinance portfolios, weighed on earnings despite stronger performance in the bank's core lending operations. 'We have had a strong quarter in terms of operational performance,' said managing director and CEO KVS Manian. 'Besides the provisions for agri and microfinance sector, there has been no impact on asset quality. In the MFI segment, we have seen the peak of the slippage and expect that it will bottom out this quarter.' Manian also said that expectations on further rate cuts by the RBI were divided, and that any reduction would affect earnings. Operating profit rose 3.7% to Rs 1,556.3 crore from Rs 1,500.9 crore in the same quarter last year, backed by growth in the bank's lending business. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like No annual fees for life UnionBank Credit Card Apply Now Undo Net interest income increased 2% to Rs 2,336.8 crore, as interest earned grew 5.6% to Rs 6,686.6 crore, while interest expended rose faster at 7.7% to Rs 4,349.8 crore. The squeeze on spreads limited the pace of growth in core interest income. The bank's loan book expanded steadily, with net advances rising 9.2% year-on-year to Rs 2,41,204.3 crore. Retail loans rose 15.6% to Rs 81,046.5 crore. Deposits grew 8% to Rs 2,87,436.3 crore from Rs 2,66,064.7 crore in the year-ago quarter. Asset quality improved, with the gross NPA ratio falling to 1.91% from 2.11%, and the net NPA ratio declining to 0.48% from 0.60%. The capital adequacy ratio under Basel III rose to 16.03% from 15.57%, supported by growth in internal accruals. According to the bank's unaudited standalone results, provisioning continued to be the main drag on profitability in the June quarter. However, growth in loans and deposits, coupled with cleaner asset quality, indicated operational strength. Stay informed with the latest business news, updates on bank holidays and public holidays . Discover stories of India's leading eco-innovators at Ecopreneur Honours 2025
