Federal Bank’s Q3 profit up 9% on strong loan growth, better asset quality

Mumbai: Strong loan growth, better asset quality, higher core income and improved profitability helped Federal Bank report excellent performance for the quarter ended December.

Private sector bank’s net profit increased by 9% on an annual basis and 9% on a quarterly basis ₹1,041 crore in 3QFY26.

Following the news, the bank’s shares increased by 8.6 percent ₹268.20 on the National Stock Exchange.

While advances increased by 9% annually ₹2.65 trillion deposit growth exceeded 15%, led by the strong momentum in the commercial and corporate banking segment. ₹2.50 trillion.

Going forward, the bank expects to maintain this momentum on both the asset and liability side, and expects it to be in the high teens, management said in its post-earnings statement.

Personal loans, The customer portfolio, which constitutes 55% of the bank’s customer assets, increased by 9% compared to the previous year. ₹94,886 crore. Commercial loan book increased by 25% annually ₹28,177 crore and corporate up 5% YoY. ₹1.42 trillion.

Apart from higher growth commercial books, the bank’s gold loan business grew by 9% compared to the previous quarter, while credit cards and commercial vehicles increased by 6%, loans against real estate increased by over 4% and microfinance institutions decreased by 1%.

Although the bank says it wants to expand its personal loan and MFI accounts from now on, it remains cautious in this regard.

asset quality The bank’s shares also continued to improve, with its gross non-performing assets ratio rising to 1.72% compared to 1.83% a quarter ago. Net NPA also decreased to 0.42% from 0.48% in the previous quarter. This was due to lower drifts. ₹435 crore as of end December ₹579 crore in the previous quarter.

Also Read | Springboard 2026 | Mid-tier banks look attractive, but are they investable?

The bank’s net interest income increased by 9% on an annual basis and 6% on a quarterly basis. ₹2,653 crore. As a result, the bank’s net interest margin increased by 12 basis points consecutively to 3.18%, driven by the improvement in the bank’s interest rates. obligation mix and repricing of assets. One basis point is equal to one hundredth of one percent.

“Our CASA rates have improved over a period of time. This improves the NIM on the liability side. Our deposit costs have come down. The decline in yield is actually less than what the repo rate cut indicates and hence there is improvement in the yield in that sense excluding repo cuts. So there are multiple factors playing a role in the NIM improvement,” said KVS Manian, Managing Director and Chief Executive Officer.

However, Manian expects the pressure from the Reserve Bank of India’s 25 basis point repo rate cut last month to take full effect in the next quarter.

“…we saw the impact of this for a month in the third quarter. This will fully emerge in the fourth quarter. We need to see how to mitigate the impact of this in the next quarter,” he said.

Also Read | HDFC and ICICI Bank look steady on loan growth and margin recovery in Q3

The current account and savings account, or CASA, rate rose 106 basis points quarterly and 191 basis points annually to 32.07% as of the end of December.

During the quarter, the bank’s cost-income ratio increased to 53.92%, which contributed to profitability thanks to continued operating leverage.

Following the news, the bank’s shares increased by 8.6 percent ₹268.20 on the National Stock Exchange.

Also Read | While loan interest rates are decreasing, deposit interest rates are not decreasing, and lenders experience heartburn.

Blackstone infusion

Executive Director Venkatraman Venkateswaran said Blackstone’s capital infusion into the bank would increase the lender’s capital to risk-weighted assets ratio by about 50 basis points if the first tranche arrives in the fourth quarter.

“This is the impact on CRAR. But as you know, the structure is such that we first get 25% and then after 18 months we get the balance. So the rest will come in FY28 only,” Venkateswaran said. As of the end of December, the bank’s CRAR was at 15.20%.

In late October, Federal Reserve announced that Blackstone would invest. ₹6,200 crore was deposited in the bank through preferential allotment of warrants and up to 9.99% stake was purchased to become a major shareholder.

“…our strategy requires an investor with long-term belief in our strategy and we found Blackstone willing to take a long-term bet on the bank’s strategy. This is a very good name to get into your cap and we believe the presence of a large investor and a well-known investor like this will increase confidence and help re-rating the bank and the stock,” he said.