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A source-linked quarter view: reported numbers, management language, guidance, and the risks that should carry forward.
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Revenue
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Revenue YoY
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reported change
EBITDA
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record provenance
Actual signal trajectory
Where this quarter sits.
Quarter read
What the record says.
Federal Bank reported a strong Q2 FY24 with broad-based growth and the highest-ever net profit. NII grew 7% sequentially, credit grew 5%, and fee income reached INR 660 crore, driven by the 'lender to banker' strategy. NIM improved to 3.22% (new compute) and is expected to inch up further, though deposit cost remains elevated. Credit costs were low at 13 bps, with management guiding 25-30 bps for H2. ROA is trending towards 1.4% target. Key risks include sustained deposit cost pressure and potential normalization of credit costs from higher-yield businesses. Overall, the bank is well-positioned with strong momentum and a clear strategy.
Colored figures show movement against the previous available record.
Guidance to track
- Management expects NIM (new compute) to reach 3.25% by year-end, with gradual improvement in H2.
- Full-year credit cost expected around 35-40 bps, with H2 likely in the late 20s to early 30s.
- Management reiterated the target of 1.4% ROA by FY25, with current trajectory ahead of schedule.
- Management aims to bring cost-to-income down to 50% by early FY25, despite near-term pressure from partner-led businesses.
Risks flagged
- Deposit costs remain elevated and may not taper quickly, potentially capping NIM expansion.
- As the bank grows unsecured and higher-yield loans, credit costs could rise from current low levels.
- Volume-related costs and partner-led businesses could keep cost-to-income elevated, delaying the 50% target.
Key quotes
- Our net profit number for this quarter is the highest we have ever achieved.
- The lender to banker strategy is playing through. Most of our corporate and retail customers are concentrating, are giving us a larger share of their business.
- We are not doing businesses that are ROA decretive or on the same margin, not incremental. We won't do the higher cost income.
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