Kerala-headquartered Federal Bank reported a 50% jump in net profit to Rs 460.26 crore for the fiscal second quarter ended September, driven by an overall improvement in the bank’s operating parameters as it effectively controlled accretion of bad debt, ensured robust recoveries and posted healthy growth in net interest income (NII).

In the year-ago quarter, net profit stood at Rs 370.6 crore.

The bank’s NII, or the difference between interest earned and interest expended, rose 7% to Rs 1,479.4 crore from Rs 1,380 crore a year ago. Net interest margin stood at 3.20% compared to 3.13% in the year-ago quarter.

“The bank has improved on all key operating parameters. The net interest income is high and we have curtailed large slippages,” Federal Bank managing director and chief executive officer Shyam Srinivasan said in a media call.

The bank’s total income shrunk about 3% to Rs 3,824 crore from Rs 3,937 crore a year ago. Operating profit dropped 9% to Rs 865 crore. However, a 54% lower provisions at Rs 245 crore helped boost the net profit.

The bank’s asset quality improved on a sequential basis with the gross non-performing assets (NPA) being at 3.24% at the end of September compared to 3.50% a quarter ago. Net NPA stood at 1.12% versus 1.23% in the preceding quarter. 

Fresh slippages were contained at Rs 320 crore, along with recoveries and upgrades of 421 crore. "Our credit cost was negative in this quarter helped by reduced slippages and higher recovery and upgrade," Srinivasan said.

Provisions (other than tax) and contingencies dropped to Rs 245 crore  from Rs 543 crore a quarter ago and Rs 532 crore a year ago. 

With part of the economy opening up, the bank’s advances grew 9.7% year-on-year to Rs 1.37 lakh crore. While retail loans grew 12%, the agri business rose 20% over the previous year. The bank’s gold loan book saw a growth of 25.88%.

Deposits grew almost at the same rate as advances to Rs 1.72 lakh crore. The low cost current and savings account (CASA) grew 18% over the previous year, taking its ratio to total deposits 36.16%, an all-time high for the bank. Retail deposits constituted 94% of the bank’s total deposits. 

About 50% of the new accounts booked was through various Fintech partnerships. Federal Bank said it has opened more than 300,000 accounts with neo-banking partners, including Jupiter, Fi and DGV.