Federal Bank Faces Profit Dip Due to Increased Provisions

MUMBAI: Federal Bank, India’s sixth-largest private lender, reported a 14.6% decline in net profit to Rs 861.8 crore for the quarter ended June 30, 2025, down from Rs 1,009.5 crore a year earlier. This drop was primarily due to a significant increase in provisions and contingencies, excluding tax, which surged by 177.4% to Rs 400.2 crore.

Operational Performance Shows Strength

Despite the profit decline, the bank's operational performance showed resilience with a 3.7% increase in operating profit to Rs 1,556.3 crore. Net interest income also saw a 2% rise to Rs 2,336.8 crore, supported by a 9.2% growth in the bank’s loan book and an 8% increase in deposits.

Asset Quality Improves

Asset quality indicators improved, with the gross NPA ratio falling to 1.91% and the net NPA ratio declining to 0.48%. The capital adequacy ratio under Basel III also rose to 16.03%, indicating a stronger financial position.

Outlook and Challenges

Managing director and CEO KVS Manian highlighted the strong operational performance but noted the impact of provisions on earnings. He expressed optimism about the MFI segment's recovery and discussed the potential effects of RBI rate cuts on future earnings.