Federal Bank Q2 Profit Jumps 45% to ₹1,386 Crore on Fee Income Surge

Federal Bank on Friday posted a year on year increase of 45.1 percent in net profit to Rs. 1386 crore in the Sept quarter of FY27 which was the highest ever for the bank. It was mainly due to an increase in interest and fee income along with lower provisions.

Net interest income increased by 26.4 per cent to Rs 3153.4 crore. Other income went up by 37.7 per cent to Rs 1490.4 crore. Income from fee grew by 31.9 per cent to Rs 1167.7 crore. Net interest margin increased by 26 bps to 3.32 per cent, according to the bank.

In the same quarter last year, Federal Banks net profit had decreased by 9.6 per cent to Rs. 955 crore.

Asset quality at decade-best levels

Gross NPA came down to 1.32% as on 30th September compared to 1.52% at the end of June. Net NPA also reduced to 0.17% from 0.18%. The Bank stated that these levels are lowest in last 10 years.

New slippage reduced by 27.5% YoY to Rs.420 cr. Slippage ratio reduced to 0.59% from 0.94%. Credit cost has gone down by 19 bps to 0.31%.

Total deposits grew 18.6% to ₹3.43 lakh crore, with CASA deposits rising 22.6% to ₹1.1 lakh crore. The CASA ratio improved 103 basis points year-on-year to 32.04%. Non-resident deposits, a traditional strength for the lender, rose 26.6% to ₹1.19 lakh crore.

Gross advances crossed the ₹3 lakh crore mark to reach ₹3.02 lakh crore. Gold loans rose 37.1%, loans against property 32.2% and credit card advances 28.3%. Commercial banking advances increased 25.5%, while corporate and institutional banking loans grew 17.2% to ₹1.05 lakh crore.

The capital adequacy ratio stood at 16.84% at the end of September, with Tier-I capital at 15.76%.

Margin guidance retained

Managing director and chief executive K V S Manian said the bank expects net interest margin to improve by 5–6 basis points each quarter. He cautioned that the progress would not be linear but said the bank was sticking to that guidance.

Manian flagged the insurance regulator’s draft consultation paper on distribution as a risk. He said its impact on fee income and on associate Ageas Federal Life Insurance could be significant, but it was too early to quantify and the bank would wait for the final guidelines.

He also said the bank was evaluating opportunities across financial services, including core and universal banking, but had nothing to disclose yet.

The September-quarter numbers come as interest rates turn higher, after the Reserve Bank of India raised the repo rate by 25 basis points to 5.5% earlier this month. Investors will track whether Federal Bank can sustain margin expansion and fee growth while keeping slippages low, and how final insurance distribution norms shape its fee income in the coming quarters.