CARE Ratings said that the rating assigned to the proposed Tier II Bonds (under Basel III) of the Federal Bank (FBL) factors in the bank's long standing track record of operations of the bank, growth in franchise with established depositor base in South India which also enables the bank generate fee-based income, increasing diversification of business into other states of the country, comfortable capitalization levels, experienced management team, adequate profitability and operating efficiency metrics and comfortable liquidity profile.

The rating remains constrained by moderate asset quality and borrower as well as geographic concentration in the advance's portfolio, the rating agency added.

Federal Bank (FBL) is an old private sector bank predominantly having operations in the state of Kerala. As on 30 June 2021, the bank has a network of 1,272 branches and 1,953 ATMs. The total business of the bank stood at Rs 2.99 lakh crore with advances of Rs 1.30 lakh crore and deposits of Rs 1.69 lakh crore as on 30 June 2021.

The bank reported 23% fall in net profit to Rs 367 crore on a 5% increase in total income 4,006 crore in Q1 FY22 over Q1 FY21.