The Federal Bank Limited

gentlemen, good day and welcome to the Q2 FY24 earnings conference call of the Federal Bank Limited. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is speak-recorded. I now hand the conference over to Mr. Sawvik Roy, Head, Investor Relations, the Federal Bank Limited. Thank you, and over to you, sir.

Thank you, and ladies and gentlemen, thank you for joining us on this busy results afternoon. We hope you've had a chance to review our latest quarterly figures. It's my pleasure to share that we have had an outstanding quarter, and I would like to highlight some key points. First and foremost, we have reported broad-based growth across all segments and businesses, which is a clear sign that our strategies are yielding positive results. In particular, our net profit number for this quarter is the highest we have ever achieved. Our ROA continues to trend well, and our ROA certainly underscores our commitment to efficient and sustainable operations. We have also successfully completed a significant capital raise in Q2, which now bolsters our financial position and allows us to pursue growth opportunities more aggressively. I'm also pleased to report that our NP numbers remained well under control, which is a testament to our proven interest management practices. Overall, we can confidently say that this quarter was a good one for us and the positive momentum continues. To provide further insights and discuss, you know, these results in detail, we have our entire senior management on this call. And I'll now hand over the call to our MD for a more in-depth analysis and to answer any questions you may have. Thank you again for being a part of this call. And please feel free to ask any questions that you may have as of now. Over to you, sir.

Yeah. Thanks, everybody. Good evening. This is Shyam here. Like Charik mentioned, the entire senior team is there. We'll be happy to answer questions. I think the key messages, he did read them out, but I just reinforce the fact that many of our initiatives, I think there's a stigma of all our initiatives coming together quite well. Over the last six, seven quarters, sequentially every quarter has been strong performance. In Q2, environment continued to be challenging, as it is likely to be for the periods ahead in certain areas. We've seen good progress on all counts. Credit and deposit growth has been quite consistently good. I do believe structurally the deposits market has been changed probably globally, certainly in India, certainly for us. And not daunted by that, we are reorganizing ourselves to make sure that through this period also we will be able to grow and expand both the balance sheet and also the quality of assets. And this quarter is a good testimony to the pivots that we've had in terms of kind of businesses that we are ramping up on with a keen eye on the credit quality being intact. Notable in Q2, other than the features that Shauiq just spoke and the provisional results that we shared early in the part of the quarter and the results that we announced today, the NII for the quarter grew quite smartly. In fact, it grew 7% sequentially. Credit grew about 5%. Evidently, the higher yield businesses are beginning to make an impact of the overall numbers. And we do think that is sustained. Free income for the quarter and generally online, the trend lines have been quite encouraging. And here again, our philosophy of being a, moving from being a pure lender to a banker, particularly as we seek out our business model, just at the cost of repeat, is about getting the better risk-rated clients pricing competitively, but asking for more business from the same client. I think the last two, three quarters are beginning to show results. Earlier in the financial year when we were meeting some of our potential investors, I explained the theory of trying to migrate from being a pure lender and being a peripheral banker to a more important banker. We are seeing traction on that count. Fee as a share of assets is almost near 1%, and we believe we have paths to get to 1.1 or better in the coming years. So the environment for deposits continues to be challenging. Our term deposits have grown remarkably well through the quarter. Wire on wire grew 33%. Domestic savings has grown reasonably well at about at our market kind of growth rate at 11%. What traditionally used to be a materially big part of our portfolio NR savings is seeing degrowth in some sense. We also quickly and constantly keep checking to see how the NR performance is. Remittances have moved up materially. Our share has gone up substantially. So there is a pivot from NR savings to NR term or NR business money going into consumption and or investment and or setting up a new business and or paying off loans. So there's some structural change happening and we have organized ourselves to make sure that we get more prominent in the domestic business. We've seen good footprint expansion and our fintech partnerships, particularly on deposits, are beginning to give us some domestic savings increase. So unbalanced Q2 has been good. We have seen progress on all counts. There are challenges in terms of growth in deposits at a price. We have organized ourselves for that. And at the beginning of financial year, we did say that H2, we will see data pickup in margins. We had also said that our dip in NIMS will be faster than the others, which it did. I do believe we've toughed out on NIMS and the increase can happen here too. So having said that, I must quickly add that the rate of growth of expectation in terms of NIMS expansion will be more moderate. I don't believe some of our numbers that we visualized to get the C25 full year. This is using the old compute. We have re-computed and present both the old and new formula. Our new formula gives net earning assets. So you will see our NIMS showing a C22. But in the spirit of full transparency, we have showed the equivalent in both formats so that nobody needs to worry that the bank is trying to outsmart and trying to show different formats. No, we are representing both formats. But here on, we will present with net earning assets, which seems to be consistent with market practice. So this expansion from here on, we do believe will be inching up, but the level of inching up, I'm not yet able to digest or comment, only because cost of deposit is yet to take more down. Though Q2 versus Q1, the rate of increase was consistent. It was not much higher. Ease on advances has moved up from seven basis points in Q1 to 14 basis points in Q2. So that trend line is quite encouraging. So let me just pause here with the following messages. Growth, 18, 20% quite possible. Credit quality holding well. ROA and ROE expansion on track. We believe we will, we've been growing quite smartly on our net profit and traction has been strong and we believe that will consistently hold. and the pivot in some of our high yield businesses is working well. Deposits continues to be a higher cost item, and we are organized for that. So let me just pause here, and Tim and I will be able to answer questions or clarify anything that's required.