Federal Bank - Q1 FY 2023 Review

Federal Bank Limited reported net revenue of ₹3,843.09 crores for the quarter ended June 30, 2022, compared to ₹3,524.98 crores for June 30, 2021. Profit After Tax was ₹634.22 crores for the quarter ended June 30, 2022, compared to ₹356.76 crores during the corresponding quarter of the previous year, respectively.

Federal Bank - Investment Summary

Federal Bank - Overview

• An established, mid-sized private bank, The Federal Bank Limited (FBL), primarily conducts business in Kerala.

• The bank has 1,291 branches and 1,860 ATMs/recyclers as of June 30, 2022.

• In relation to the Bank's "Basel III -Tier II Bonds" of Rs. 1000 Crores (Size of Issue), CARE Ratings has reaffirmed the "CARE AA" Rating and changed the outlook from "stable" to "positive."

Federal Bank - Quarterly Summary

Business

• On April 23, 1931, the Bank was established under the Travancore Companies Regulation, 1916 as the Travancore Federal Bank Limited Nedumpram. After taking over in 1945, the late K.P. Hormis, the bank's founder and visionary banker, grew it into a major institution across the country.

• On December 2, 1949, the Bank's name was changed to The Federal Bank Limited.

• On July 11, 1959, the Bank received a license under the Banking Regulation Act, 1949, and on July 20, 1970, it was designated as a scheduled commercial bank under the Second Schedule of the Reserve Bank of India Act, 1934.

• Federal Bank established its first foreign representative office in Abu Dhabi in January 2008.

• In November 2015, Federal Bank established its International Financial Service Centre (IFSC) Banking Unit (IBU) in GIFT City, Gujarat, the country's first IFSC. Since the International Banking Unit (IBU) Branch at GIFT City (Gujarat International Financial Tec-City) opened, the bank has provided importers with buyer's credit at a discounted rate.

• The Bank's paid-up capital increased by ₹ 43.10 crores in FY 2017–18 through the distribution of 21.55 crores equity shares worth ₹ 2 each that were acquired through qualified institutional placement.

• The GPTW® Institute recognized Federal Bank Limited as a Great Place to Work in 2022.

• The Bank is listed on the London Stock Exchange, the National Stock Exchange of India, and BSE Limited.

  The business segment of Federal Bank Limited is as follows:

  • Corporate/ Wholesale Banking:

    • The section includes lending money, accepting deposits, and providing other banking services to corporations, trusts, partnership businesses, and statutory organizations that are not included in the retail banking segment.

    • Interest on loans given to these clients and fees levied by other banking services are the main sources of revenue for this sector.

  • Retail Banking:

    • Retail banking includes lending money, accepting deposits, and providing other banking services to any legal person, including small business clients, depending on the borrower's status, the product, the level of risk involved, and the amount involved.

    • Interest on loans given to these clients plus fees/charges from other banking services, such as para-banking activities, make up the segment's revenue.

  • Treasury:

    • Trading and investing in corporate debt, government securities, mutual funds, derivatives, and foreign currency operations for both internal use and client accounts are all part of the Treasury's operations.

    • Gains, losses, margins, fees/charges on trading and foreign exchange activities, along with interest from the bank's investment portfolio, make up the majority of this segment's revenue.

  • Other Banking Operations:

    • Banking transactions that fall outside of the aforementioned sectors are included in this category. This division discloses the revenue from such services as well as any related expenses.

• Out of the total revenue, 26% has been generated from Corporate/Wholesale banking, 59% from Retail Banking, 14% from Treasury, 4%, and 1% from Other Banking Operations in FY 2022 compared to 28%, 55%, 17%, and 1% in FY 2021, respectively.

SWOT ANALYSIS

• Strength

  • Experienced Management.

  • Strong customer base.

  • Strong Profit growth from past few years.

  • Widespread network.

• Weakness

  • Zero Promoter shareholding.

  • Less market penetration in cities.

  • High-interest expense compared to net interest income.

• Opportunity

  • Ability to improve urban service.

  • Investment in digital technology.

  • Can come up with new unique schemes.

  • Increasing capital expenditure by the companies.

• Threat

  • Increasing competition in the financial sector.

  • Ongoing uneven circumstances globally (e.g., Inflation).

Federal Bank - Revenue Trend

Federal Bank - Ratio Analysis