The Federal Bank · FEDERALBNK
Federal Bank's profit rose 45% on a year ago, though its margin slipped a basis point on the quarter
Federal Bank's standalone profit rose 45.1% on a year ago in its latest quarter while its net interest margin slipped a basis point on the quarter, and a treasury gain the chief executive said may not repeat helped.
Published · Inve Research Desk
3.32%
net interest margin last quarter
One basis point lower than the quarter before: the margin is 26 basis points above a year ago, but it added nothing this quarter.
How they did last quarter
Management repeated its guidance, but the margin paused and the profit jump included income the chief executive said may not repeat.
- Net interest margin3.32%, down 1 basis point on the quarter beforevs Guidance for FY27 of "5 to 6 basis per quarter improvement", not linear (call of 16 October 2026)About 12 basis points have been gained since March, 6 a quarter on average (calculated); the chief executive said the bank was still striving to reach the guided pace.
- Return on assets1.32%, up 10 basis points on the quarter beforevs Guidance of "3 to 4 basis per quarter is the improvement we want to strive for" (call of 16 October 2026)Ahead of the guided pace for the quarter; management said the improvement need not come in every quarter.
- Other income (consolidated)₹1,521 crore, up 40.6% on the quarter beforevs ₹1,082 crore in the quarter beforeOther income was 71.7% of profit before tax, against 62.1% the quarter before; it was 80.5% a year earlier.
- Cost-to-income ratio52%, as Venkatraman Venkateswaran statedvs The chief executive's "54-ish" level for the bank, given later on the same callThe two figures differ by about two percentage points; calculated from the call's own lines, the ratio is 52.1%.
Profit jumped while the lending margin stood still
Federal Bank reported standalone net profit of ₹1,386 crore for the September 2026 quarter, up 45.1% on a year ago. Its net interest margin, the gap between what it earns on loans and investments and what it pays for money, as a share of earning assets, was 3.32%, one basis point lower than the quarter before. A basis point is one-hundredth of a percentage point.
The margin had been rising: at its April call the bank reported 3.20% for the March results. Because this quarter's change was a fall of one basis point, the quarter before stood slightly higher, calculated from the reported change, so the whole gain since March came in that earlier quarter and none in this one.
A foreign-currency deposit window blunted lending yields
Management pointed to FCNR(B) deposits, foreign-currency term deposits from non-resident Indians. Chief executive Krishnan Subramanian Manian said lending yields had bottomed the quarter before and that this quarter's softness was more the FCNR effect: "Of course, it has impacted NIM, especially in the lending side". An analyst offered an estimate of the drag; the chief executive would not size it and said only that the margin would have been higher.
Cheaper funding no longer offsets it. Venkatraman Venkateswaran said most of the benefit of the rate cuts has now passed through, and the cost of deposits fell only slightly on the quarter, against a much larger fall the quarter before. Management kept its guidance of 5 to 6 basis points of margin improvement a quarter on average for the year, not in a straight line. After the Reserve Bank of India raised its repo rate in October, Venkateswaran said loans tied to external benchmarks will reprice ahead of deposits, and that competition for deposits will intensify once liquidity normalises.
Other income rose, with a treasury gain that may not repeat
Balance growth explains part of the profit: standalone net interest income rose on the quarter. Other income, the fees and trading gains outside lending, also rose. Inve's results table is consolidated, a different basis from the standalone figures the bank called out on the call, and on that basis other income was ₹1,521 crore, 71.7% of profit before tax, against 62.1% the quarter before; it was 80.5% a year earlier.
Manian was direct about the source: "it is a good treasury quarter, whether we can assume that the same will repeat, yes, it may not repeat". He listed gains from IPOs, one other investment and the encashment of a security receipt, and added that the two quarters before had been very low, so part of the gain is a return to normal.
Other income and profit before tax, last eight quarters
Other income fell in June, then rose 40.6% in September.
₹ crore
| Other income | PBT | |
|---|---|---|
| Dec 2024 | 931 | 1,277 |
| Mar 2025 | 1,047 | 1,434 |
| Jun 2025 | 1,164 | 1,270 |
| Sept 2025 | 1,105 | 1,373 |
| Dec 2025 | 1,143 | 1,507 |
| Mar 2026 | 1,186 | 1,714 |
| Jun 2026 | 1,082 | 1,741 |
| Sept 2026 | 1,521 | 2,122 |
Management cited 52% for cost-to-income and referred to 54%
Venkatraman Venkateswaran said the cost-to-income ratio improved to 52% and the bank would keep operating in that range. Later on the same call the chief executive referred to about 54%, the level he said the bank had been guiding to, and said the bank would stay around it for the time being; the call did not reconcile the two. At its April call the bank had guided a range of roughly 53% to 56%.
Calculated from the call's own lines, net interest income, other income and operating profit, the ratio is 52.1%.
The record: notes, full financial tables
Notes
Impact 4/5 Margin Mixed
Federal Bank margin stalls at 3.32% as FCNR(B) deposits weigh on lending yield
Federal Bank's net interest margin was 3.32% in the September 2026 quarter, down one basis point on the quarter before, after 3.20% at March 2026. The chief executive said lending yields bottomed the quarter before and that FCNR(B) deposits, foreign-currency term money from non-resident Indians, weighed on lending this quarter, but he would not size the effect. Management restated guidance of 5 to 6 basis points of improvement a quarter on average for the year, not in a straight line.
“Of course, it has impacted NIM, especially in the lending side”— Krishnan Subramanian Manian, managing director and CEO
Impact 4/5 One-off Mixed
Federal Bank's profit gets a treasury lift the CEO says may not repeat
The chief executive said treasury had a good quarter, with gains from IPOs, one investment and a security-receipt encashment; a repeat may not come, and part of the gain is a return to normal after two very low quarters. Consolidated other income was ₹1,521 crore in the September 2026 quarter, up 40.6% on the quarter before, against ₹1,105 crore a year earlier. Venkatraman Venkateswaran put cost-to-income at 52%; the chief executive later referred to about 54%, the level he said the bank had been guiding to, and the call did not reconcile the two. April 2026 guidance was roughly 53% to 56%.
“it is a good treasury quarter, whether we can assume that the same will repeat, yes, it may not repeat”— Krishnan Subramanian Manian, managing director and CEO
Impact 3/5 Margin Mixed
Federal Bank ROA hits 1.32%, credit cost 0.31%, 10 basis points lower on the quarter
ROA was 1.32% in September 2026, up 10 basis points on the quarter and 23 on a year ago; credit cost was 0.31%, down 10 basis points. ROA rose 10 basis points against management's guidance of 3 to 4 basis points a quarter on average, which it said need not come every quarter; it had slipped about 2 basis points in the June quarter, so since March's 1.24% it has gained 8 basis points, about 4 a quarter, by our arithmetic. In April 2026 the bank left credit-cost guidance at 50-60 basis points, a full-year range; 0.31% is one quarter. Gross bad loans were 1.32%, from 1.62% at March 2026.
“3 to 4 basis per quarter is the improvement we want to strive for”— Krishnan Subramanian Manian, managing director and CEO
Impact 3/5 Demand Mixed
Federal Bank CASA ratio is 32.0%, below March's 32.9%, with guidance said to be unchanged
Federal Bank's low-cost deposits (current and savings accounts, CASA) were ₹1,09,803 crore on deposits of ₹3,42,693 crore at 30 September 2026, a ratio of 32.04% calculated from the call figures. That compares with 32.94% in the call of 29 April 2026, so the ratio is lower than in March, though CASA grew 22.56% on a year ago and the ratio is 103 basis points higher than a year earlier, as the call put it. Venkatraman Venkateswaran said there is no change to the guidance, whose target ratio was 36% in April.
“And there is no change to our guidance on CASA.”— Venkatraman Venkateswaran, Federal Bank executive
Impact 3/5 Guidance Mixed
Federal Bank keeps mid-teens loan growth guidance after advances rose 12.4% in six months
Gross advances were ₹3,01,687 crore at 30 September 2026, up 21% on a year ago and 7.27% on the quarter before. That is 12.4% above ₹2,68,369 crore at March 2026, calculated from the reported figures. The chief executive said the bank maintains its mid-teens growth guidance; in January 2026 the bank had said it was working towards growth of around 16% for the following year, FY27. Gold loans rose 37.13% on a year ago.
“we continue to maintain what we had guided as mid-teens as the growth rate guidance”— Krishnan Subramanian Manian, managing director and CEO
Impact 3/5 Risk Negative
Federal Bank cannot yet size the hit from a draft regulation on bancassurance fees
An analyst said bancassurance fees were about ₹390 crore last year and asked for the impact of a draft regulation. The chief executive said there is an impact but it is too early to size, since it is only a draft, and that the bank expects a better estimate over the next quarter or so.
“Of course, there is an impact. But how much is something that we would get a better handle as we go”— Krishnan Subramanian Manian, managing director and CEO
Financials
Income statement, last 8 quarters
| Quarter end | Sales | YoY | Other income | PBT | Net profit |
|---|---|---|---|---|---|
| Sept 2026 | 8,383 | +16.2% | 1,521 | 2,122 | 1,568 |
| Jun 2026 | 7,862 | +9.9% | 1,082 | 1,741 | 1,302 |
| Mar 2026 | 7,947 | +11.8% | 1,186 | 1,714 | 1,392 |
| Dec 2025 | 7,360 | +1.3% | 1,143 | 1,507 | 1,125 |
| Sept 2025 | 7,216 | +3.0% | 1,105 | 1,373 | 1,023 |
| Jun 2025 | 7,151 | +6.3% | 1,164 | 1,270 | 951 |
| Mar 2025 | 7,108 | +12.1% | 1,047 | 1,434 | 1,120 |
| Dec 2024 | 7,265 | +19.4% | 931 | 1,277 | 951 |
Balance sheet
| As of | Equity | Debt | Investments | Fixed assets | CWIP | Total assets |
|---|---|---|---|---|---|---|
| Sept 2026 | 42,754 | 37,996 | 84,242 | 1,538 | 0 | 4,43,260 |
| Mar 2026 | 40,043 | 33,193 | 76,471 | 1,420 | 108 | 4,02,081 |
| Sept 2025 | 36,266 | – | 70,296 | 1,508 | 0 | 3,67,566 |
| Mar 2025 | 34,538 | 32,596 | 66,058 | 1,456 | 72 | 3,60,152 |