Federal Bank Shares Today: Stocks Decline 5% As Q1 Net Profit Sees 14.6% Dip

Federal Bank Shares Today: Federal Bank's share price took a hit on Monday, dropping 5 per cent to a 14-week low of Rs 185 per share, after the lender announced its quarterly performance. Federal Bank's Q1 net profit for the quarter fell by 14.6 per cent year-on-year to Rs 862 crore. This decline was primarily due to a significant increase in the money set aside for potential loan losses (provisions), which jumped 177.4 per cent year-over-year to Rs 400 crore, and a rise in loans that went bad (slippages), especially in its microfinance (MFI) business. The bank's management believes that issues related to loan losses will subside after the next three-month period.

Federal Bank's net profit for the June quarter stood at 861.8 crore, marking a 14.6 per cent drop. The funds set aside for potential loan losses increased by a substantial 177 per cent, predominantly due to agriculture and microfinance loans. This is the main reason for the profit decline, demonstrating the bank's cautious approach in preparing for more potential defaults, especially in the farming and small business sector. These increased provisions directly reduce current profits.

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Despite this, the bank's net interest income (NII) grew by 2 per cent year-on-year, reaching 2,336.8 crore. This is a positive sign, indicating that the bank's core lending operations are still expanding and generating more revenue. This suggests that the fundamental aspects of the bank's operations remain healthy, even as specific issues like loan losses impact the final profit.

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The bank's loan quality has improved, indicating that the overall loans the bank is lending will be less risky. This points to better management of its loan portfolio and a reduced likelihood of future loan losses. The percentage of gross non-performing assets (GNPA) improved, decreasing from 2.11 per cent to 1.91 per cent, signifying a healthier loan book and reduced risk for the bank. Similarly, the percentage of bad loans accounted for by provisions (net NPA) also improved, and decreased from 0.60 per cent to 0.48 per cent, instilling confidence in the bank's asset management.