Federal Bank Shares Rally 7% After Q1 Profit Jumps 36%, NII Surges 26%; Asset Quality Improves

Mumbai, July 17: Federal Bank share price gained as much as 7% on Friday after the Kochi-based private sector lender reported robust growth in net profit and net interest income (NII), lower provisions and an improvement in asset quality.  

The stock initially slipped after the results were announced but quickly reversed course, climbing over 7% from the day’s lows as investors cheered the healthy performance. As of writing the stock was up 6.6% at Rs 348.30. 

The Kochi-based lender reported a 36.5% year-on-year increase in net profit to ₹1,177 crore for the quarter ended June 30, compared with ₹862 crore in the corresponding period last year. Net Interest Income (NII) rose 26% to ₹2,946 crore, up from ₹2,336 crore a year ago, driven by healthy loan growth and improved lending yields. The bank also reported a net interest margin (NIM) of 3.33%, compared with 2.84% in the year-ago quarter. 

Asset quality strengthens 

Federal Bank continued to improve its balance sheet during the quarter, with asset quality metrics showing sequential improvement. 

Gross non-performing assets (GNPA) declined to 1.52% from 1.62% in the March quarter, while net NPAs improved to 0.18% from 0.20%. In absolute terms, net NPAs fell to ₹506 crore from ₹569 crore in the previous quarter, reflecting better recoveries and disciplined underwriting. 

Provisions decline sharply 

The stock jumped after results showed provisions had declined. Source: NSE 

The lender also reported a significant reduction in credit costs. Total provisions stood at ₹317.7 crore, down from ₹741 crore in the March quarter and ₹400 crore in the corresponding quarter last year. 

The lower provisioning requirement, coupled with healthy growth in core lending income, helped support the bank’s strong bottom-line performance during the quarter. 

Earlier this month, a broker assigned Federal Bank a ‘BBB-‘ long-term and ‘A-3’ short-term issuer credit rating with a stable outlook. The agency said the rating reflects its expectation that the lender will maintain steady financial performance over the next two years, supported by stable profitability, healthy capitalisation and sound asset quality. 

Stock rebounds after initial volatility 

Federal Bank shares were trading over 2.5% higher ahead of the earnings announcement. The stock briefly slipped by more than 1.5% after the results before staging a sharp recovery, rising over 7% from the day’s lows as investors digested the stronger-than-expected earnings. 

The stock has also maintained healthy momentum over the past month, gaining more than 8%, as improving financial performance and a stable outlook continue to bolster investor confidence. 

Source: 

• https://www.nseindia.com/get-quote/equity/FEDERALBNK/The-Federal-Bank–Limited