Analyst Meet / AGM     14-Jul-23
Conference Call
Federal Bank
Expects to sustain growth momentum, NIM to improve from Q2FY2024

Federal Bank conducted a conference call on 13 July 2023 to discuss its financial results for the quarter ended June 2023. Shyam Srinivasan, MD&CEO of the bank addressed the call:


The bank has crossed an important milestone of Rs 4 lakh crore on business volumes front end June 2023. In a seasonally weak quarter, the bank has exhibited strong growth momentum and all businesses have grown by 5% on sequential basis in Q1FY2024. The bank expects this growth momentum to be sustainable in FY2024 and ahead.

The bank had guided at 18-20% growth in the deposits as well as advance and it is confident of achieving the guidance with the strong start for the financial year.

The credit growth opportunity for the bank is intact and growing. The bank is observing the demand sustaining in the early part of Q2FY24.

The bank wants to penetrate across all businesses and do not want to dominate any single business.

The rate war seems to behind on the liabilities front. The NRE and remittance business which was muted in FY2023, is witnessing pick up in FY2024.

The full impact of the deposit rate hike is reflected into Q1FY2024 causing decline in margins. However, the bank expects margins to start recovering from Q2 and expect full margins for FY2024 to be similar to FY2023 at 3.3%.

The credit cost is expected to be at 40 bps for FY2024

The fresh slippages in the retail segment moved up in Q1 as the moratorium for the restructured loan book ended in March 2023 causing some rise in slippage in the restructured loan book. As per the bank, out of the fresh slippages of Rs 250 crore in retail segment for Q1FY24, 30% related to restructured loan book.

The deposits growth of the bank was boosted by deposits of Rs 2000 crore relating to Rs 2000 currency notes withdrawal.

About 70% of the network of the bank is in semi urban and rural area. About 40-45% of the deposit is from outside Kerala

The bank is expecting NIM expansion from second quarter as it expect yield on advance to improve from 9.21% in Q1FY24 to 9.27% in Q2FY24.

An incremental term deposit cost stands at 6.4%. The blended saving account cost is 3.05%.

The share of retail deposit stands at 85% and the bank expects it to maintain at 85-88%.

The bank is targeting at fee to asset ratio of 1%.

The share of repo linked loan book stands at 49% and fixed rate is at 27%.

The bank ended the year FY2023 with RoA of 1.28%, while the bank is expecting 7 to 8 bps improvement in RoA for FY2024 and further in FY2025.

The bank is holding 15% provisions on restructured loan book, in addition to 10% management overlay provisions.
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