Federal Bank on Friday reported a 63.5 per cent jump in net profit at Rs 601 crore in the June quarter on a steep decline in money set aside for bad loans.

The South-based lender had reported a net profit of Rs 367 crore in the year-ago period.

Its core net interest income grew 13.1 per cent to Rs 1,605 crore during the reporting quarter on a 16 per cent advances growth and a 0.07 per cent expansion in the net interest margin to 3.22 per cent.

Overall, other income dipped 30.2 per cent to Rs 453 crore, while the operating profit was also down by 14.1 per cent to Rs 973 crore.

Its managing director and chief executive Shyam Srinivasan attributed the same to reverses on the treasury operations side as the yields are going up, and added that the bank has tried to improve on other business parameters while trying to restrict impact of the overall markets and rates movements on its investment book.

The profit on sale of securities came at Rs 12 crore for the quarter under review as against Rs 394 crore a year ago, while the bank management said that the overall fee income came at Rs 441 crore as compared to Rs 255 crore in the preceding year.

The bank's total provisions more than halved to Rs 373 crore during the June quarter, majorly on the back of a reduction in the loan loss provisions which narrowed down to Rs 150 crore for the reporting quarter.

From an asset quality perspective, the stock of gross non-performing assets came at 2.69 per cent at the end of June. The same stood at 3.50 per cent in the previous year and 2.80 per cent three months ago.

The fresh slippages came at Rs 444 crore, with retail contributing a bulk Rs 204 crore.

Srinivasan said the spurt in retail slippages is due to advances restructured earlier slipping into NPAs, and the bank is not concerned about it as it expected a fifth of such advances to slip.

He said that slippages from the retail and also agriculture, which did not have any regulatory forbearance in the past, will be higher going forward.

The bank expects the overall credit costs to come at between 0.40-0.50 per cent for FY23, Srinivasan said.

He further said that it is aiming to maintain credit growth at the current level of about 16 per cent, and will aim to get the NIM at 3.25 per cent levels.

The bank holds a 7 per cent market share in the overall deposits mobilised by the Indian banking system and will aim to hold its share or increase it in the present set of deposit mobilisation push launched by the RBI as the rupee comes under pressure.