Read the quarter in context.
A source-linked quarter view: reported numbers, management language, guidance, and the risks that should carry forward.
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Where this quarter sits.
Quarter read
What the record says.
Federal Bank reported a historic PAT of INR 1,007 crore in Q3 FY24, its first four-digit profit, driven by strong business momentum and strategic branch expansion. NII also reached an all-time high. The bank maintained robust asset quality despite a one-off corporate slippage of ~INR 70 crore, which is expected to upgrade in Q4. Management reiterated its focus on achieving a 1.4% ROA by end of 2024 and targeting 1.5% ROA over the next 18 months. Deposit growth remains a challenge due to high cost and structural shifts in NR deposits, but the bank aims to moderate its CD ratio to ~80% by calendar 2024. Risks include potential margin compression from rising deposit costs and regulatory changes like AIF provisioning. Overall, the bank is confident in sustaining growth and return ratios.
Colored figures show movement against the previous available record.
Guidance to track
- Management confirmed they are on track to achieve 1.4% ROA by end of 2024, with an aspirational target of 1.5% over the next 18 months.
- The bank plans to bring its CD ratio down from ~83% to ~80% by calendar 2024 through balanced growth in deposits and loans.
- Despite deposit cost pressures, the bank expects to sustain loan growth of around 18%, with possible mix adjustments.
Risks flagged
- Rising cost of deposits and tight liquidity could compress NIMs, though management aims to protect ROA through other income and efficiency.
- The bank has exposure to AIF and awaits regulatory clarity; potential provisioning could impact earnings in Q4.
- Post-COVID, NR customers are allocating more to investments abroad, reducing deposit inflows; the bank is adapting but faces headwinds.
- Employee expenses rose due to wage revision catch-up (~INR 50+ crore); future pension provisions remain uncertain and could add costs.
Key quotes
- This quarter, we achieved a historic milestone with our first-ever four-digit profit number, reaching an impressive INR 1,007 crore.
- I am particularly pleased that we did get to that four-digit number. Having been a fair amount of years on this job, at some stage many years ago, this looked like a dream.
- We don't want to get spooked by NIM by itself. We want to make sure that we are on course delivering our ROA on trajectory.
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