Federal Bank reported a 36.57% year-on-year increase in net profit to ₹1,176.93 crore for the quarter ended June 30, 2026 (Q1 FY27), driven by strong growth in its core lending business, expanding margins and a sharp improvement in asset quality.
The bank’s performance was powered by robust growth in net interest income and fee income, even as treasury income remained subdued amid volatile market conditions.
Core banking business drives earnings
Net interest income (NII) rose 26.06% year-on-year, while fee income increased 21.71%, reflecting the strength of the bank’s core franchise.
Net Interest Margin (NIM) expanded 39 basis points to 3.33%, supported by a 60-basis-point decline in cost of funds, which outpaced the 44-basis-point compression in asset yields.
The bank’s cost of deposits also improved significantly, falling 57 basis points to 5.21%.
Asset quality improves to historic levels
Federal Bank reported its lowest net non-performing asset (NPA) ratio in a decade at 0.18%, with the absolute net NPA declining 56.29% year-on-year to ₹506.04 crore.
Gross NPA improved to 1.52%, while fresh slippages fell 37.79% to ₹409.48 crore.
The Provision Coverage Ratio (excluding technical write-offs) strengthened to 87.37%, an improvement of 1,296 basis points over the previous year. Including technical write-offs, the coverage ratio stood at 94.23%.
Credit cost also declined to 0.41%, reflecting the improving quality of the loan book.
Business nears ₹6 lakh crore milestone
The bank’s total business grew 13.05% year-on-year to ₹5.98 lakh crore, inching closer to the ₹6 lakh crore milestone.
Total deposits increased 11.37% to ₹3.20 lakh crore, while gross advances rose 14.94% to ₹2.81 lakh crore.
CASA deposits climbed 18.26% to ₹1.03 lakh crore, significantly outpacing overall deposit growth and lifting the CASA ratio by 188 basis points to 32.23%.
NRI deposits (NRE and ONR) reached ₹1.05 lakh crore, registering 14.24% annual growth after crossing the ₹1 lakh crore milestone in the previous quarter.
Strong momentum across lending segments
The bank continued to witness healthy growth across its key lending businesses. Commercial Banking expanded 22.96%, Gold Loans grew 33%, Loan Against Property (LAP) increased 21%, while the Credit Card portfolio surged 36% year-on-year.
Corporate & Institutional Banking also recorded 16.12% growth, with the loan book crossing the ₹1 lakh crore milestone for the first time.
Meanwhile, the cost-to-income ratio improved by 239 basis points to 52.50%, despite absorbing the impact of the annual wage revision.
CEO highlights resilient franchise
Federal Bank Managing Director & CEO KVS Manian said the quarterly performance underscored the strength of the bank’s core operating franchise.
“Our profit grew nearly 37% in a period when treasury had a challenging quarter, which shows that earnings are coming from the core business rather than market gains. Net interest income growing 26% against advances growth of 15% reflects our focus on expanding net interest margins,” he said.
He added that the bank’s 0.18% net NPA is the lowest in its recent history, while the strong provision coverage ratio has helped build a resilient balance sheet through lower credit costs and prudent provisioning.
The bank also reported that its restructured loan book declined to ₹1,541.30 crore, representing 0.55% of gross advances, reflecting its continued focus on secured and granular lending