Federal Bank Q3 PAT rises 9% on stable core income growth

Private loans made up 55% of customer assets, corporate loans made up 34%, while commercial loans made up the rest

The lender’s net interest income (NII) rose 9 per cent annually to ₹2,653 crore in Q3FY26, while other income rose 20 per cent to ₹1,100 crore. The bank’s pre-provision profit rose 10 percent year-on-year to ₹1,729 crore. Net interest margin (NIM), a key indicator of profitability, rose 7 basis points (bps) year-on-year and 12 basis points quarter-on-quarter (qoq) to 3.18 percent in the third quarter.

“In the next quarter, there will be pressure from the latest cut in repo rate (on NIM). We have already seen its impact for a month in the third quarter, and that will be fully reflected in the fourth quarter. We have to see how we can mitigate the impact of that in the next quarter,” said KVS Manian, MD & CEO, Federal Bank.

Core activity

Federal Bank advances grew to ₹2.55 lakh crore at end-December, up 11 per cent year-on-year. Retail loans made up 55 percent of customer assets, while corporate loans made up 34 percent and commercial loans made up the rest.

Deposits grew 12 per cent year-on-year to ₹2.97 lakh crore, of which the share of low-cost current and savings accounts (CASA) rose to 32.07 per cent in the third quarter from 30.16 per cent in the last fiscal. The lender aims to grow its total loans and deposits in the high-teens, management said, without providing specific growth guidance.

The Federal Bank is awaiting final expected credit loss (ECL) guidance from the Central Bank before making provisions for this, management said. Following reports that Federal Bank is in talks to acquire Deutsche Bank’s retail and asset management businesses in India, Manian said the lender is continuously evaluating value accretion opportunities but has no specific deal details to disclose yet.

Asset quality

The Federal Bank’s asset quality has improved, with new slippages falling to ₹435 crore in the third quarter, compared to ₹579 crore last quarter. Accordingly, third quarter provisions fell 0.1 per cent qoq to ₹688 crore. The bank has seen better performance in microfinance lending since the last quarter, with better recovery rates, management said.

Overall, the bank’s gross and net non-performing asset ratio (GNPA, NNPA) improved to 1.72 percent and 0.42 percent respectively in December, compared to 1.83 percent and 0.48 percent in the previous quarter. The bank will cautiously grow its unsecured loan portfolio in the future, management said.

Finally, the Federal Bank expects the capital adequacy ratio to increase by 50 basis points when private equity firm Blackstone’s first tranche of capital is delivered in the fourth quarter. In October, Blackstone proposed to acquire nearly 10 percent of Federal Bank for about ₹6,200 crore. The transaction still needs final approval from the banking supervisor. The Federal Bank’s capital adequacy ratio stood at 15.20 percent at the end of December.

Published on January 16, 2026