Federal Bank Bets on High-Yield Segments for Profitable Growth

Federal Bank is charting a course for sustainable and profitable growth by prioritizing high-yield lending segments over sheer volume expansion. Executive Director Venkatraman Venkateswaran told CNBC TV18 that the bank expects strong momentum in targeted areas such as loan against property and business banking, signaling a strategic shift toward margin-focused growth.

Focus On Profitable Segments

“We expect to see [loan against property and business banking] coming back very strongly,” Venkateswaran said, highlighting a turnaround in medium-yield segments after previous de-growth.

The bank’s performance in select areas has been encouraging:

• Commercial banking: Up 7% quarter-on-quarter
• Commercial vehicle and construction equipment lending: Up 4%
• Card loans: Up nearly 4.5%
• Retail gold loans: Up 7% QoQ, compared to 3% overall gold loan growth

Retail Growth And Balance Sheet Strategy

Overall retail growth of around 1.5% reflects the bank’s balance sheet composition rather than weak demand. “Nearly 50% of advances is in home loan and corporate segments, which contribute the least at this stage to the margins,” Venkateswaran explained, emphasizing that the strategy is to prioritize profitability over headline loan growth.

Outlook On Margins

Federal Bank remains optimistic about net interest margins (NIMs). While avoiding specific guidance, Venkateswaran said, “The growth trajectory on NIMs will continue to be strong. We obviously want to grow the NIMs from the current levels.” He added that the bank will take a cautious approach, assessing performance “one quarter at a time,” especially with potential interest rate cuts on the horizon.

Market Snapshot

Federal Bank’s market capitalization stands at around ₹55,918.70 crore. Its shares have gained close to 18% over the past year, reflecting investor confidence in its strategic direction and operational resilience.

Conclusion

Federal Bank’s deliberate focus on high-yield segments such as business banking, loan against property, and gold loans underscores its commitment to profitable growth. While overall loan expansion remains modest, the bank’s strategy aims to strengthen margins and shareholder value. With steady gains in targeted areas and a positive outlook on NIMs, Federal Bank appears well-positioned to navigate evolving market conditions and deliver sustainable returns.

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