Kerala-based Federal Bank reported a net profit of ₹1,259 crore for the March quarter, marking a strong y-o-y growth of 22%, driven by improving core earnings and operating leverage. The bank had registered a net profit of ₹1,030 crore in Q4 FY25 and ₹1,041 crore in Q3FY26.
For the full financial year, the bank posted a net profit of ₹4,117.32 crore, reflecting the steady earnings delivery despite a dynamic rate environment.
liability strategy sharpens funding profile
A key highlight of the quarter was the bank’s conscious recalibration of its liability mix. By focusing on retail deposits and reducing dependence on high-value bulk deposits, the bank brought down its cost of funds to 5.46%. This strategic shift is aimed at building a more stable and granular funding base while protecting margins over the medium term.
CASA and NR franchise hit key milestones
The bank achieved a significant milestone in its liability franchise, with both CASA and Non-Resident (NR) deposit books crossing the ₹1 lakh crore mark. CASA ratio improved sharply to 32.94%, up 271 basis points YoY, while CASA balances rose to ₹1.03 lakh crore, reflecting strong traction in low-cost deposits.
At the same time, the NR deposit book stood at ₹1,02,619.69 crore, registering a 7.04% sequential growth, further reinforcing the bank’s strong positioning in this segment.
Balanced growth across key lending segments
On the asset side, Federal Bank continued to execute its strategy of rebalancing the loan mix toward higher-yielding and granular segments. Commercial Banking grew 5.92% QoQ, while Retail Banking expanded 3.21% QoQ, indicating healthy demand across focus segments.
Overall gross advances rose to ₹2.68 lakh crore, up 3.65% sequentially, supported by traction in commercial, retail, and CV/CE segments.
Fee income remains a standout driver
The bank’s fee income story continued to stand out, rising 10.54% QoQ to ₹990.92 crore. This steady growth in non-interest income reflects deepening customer engagement and cross-sell capabilities, adding resilience to overall revenue streams.
Asset quality improves to record lows
Asset quality metrics improved further, with Gross NPA declining to 1.62% and Net NPA to 0.20%, both at record low levels. Provision Coverage Ratio (excluding technical write-offs) improved sharply to 87.07%, strengthening the bank’s balance sheet buffers.
Efficiency gains and return ratios strengthen
Operational efficiency saw a notable improvement, with the cost-to-income ratio declining sharply by 665 basis points sequentially to 47.28%, reflecting strong operating leverage.
Return ratios also strengthened, with Return on Assets at 1.36%, Net Interest Margin at 3.74%, and Return on Equity at 13.69%, indicating improved profitability and capital efficiency.
Wealth foray signals next growth leg
During the quarter, the bank launched its in-house wealth management platform, marking a strategic expansion into higher-value customer segments and fee-based opportunities. This move is expected to enhance the bank’s product suite and deepen customer relationships over time.
Underlines strategic progress
Federal Bank Managing Director & CEO, KVS Manian, said: “Our Q4 performance represents a strong operational quarter that is fully aligned with our strategic roadmap. We have made significant progress in restructuring our liabilities by focusing on retail mobilisation and reducing reliance on high-value deposits, which is reflected in our optimised cost of funds.”