• Advance growth: Federal Bank stands by mid-teens advances growth guidance for the near term; FCNR(B) deposits boosted Q2 growth. Medium-yielding assets grew 21 to 22%, while gold has grown at 35% plus for several quarters.
• Margin outlook: NIM rose about 26 basis points year-on-year, and management guided for 4 to 6 basis points of accretion quarter on quarter, largely from structural changes in asset mix and deposits. Repo-linked assets account for about 45, 46% of the book, but FCNR(B) lending, hardening deposit rates and pressure on yields are offsets.
• Fee income: Fee to average asset was 1.11%, with growth across distribution, processing, trade and treasury income. Insurance contributes significantly and could be affected by forthcoming guidelines; a security receipts sale contributed a one-off about 30, 35-odd crore.
• Acquisition plans: The bank is not in active discussions on inorganic activity. Areas of interest include AMC and securities businesses, and wealth, SME, affordable housing and micro LAP; any deal would depend on fit and attractive valuation.
• Returns and capital: Management expects ROA accretion of 3 to 4 basis points quarter on quarter; ROE is about 13.5% plus. Capital adequacy is well above 16.8%, and the pending 75% of warrants worth about 6,200 crore is expected to support the bank for the next 12 to 18 months, with no capital raise needed at this point.