Federal Bank delivered its highest-ever quarterly net profit of ₹1,386.09 crore in Q2FY27, representing a 45.10% year-on-year increase and 17.77% quarter-on-quarter growth. According to latest reports from CNBC TV18, The Economic Times, and The Hindu BusinessLine, the bank's net interest income rose 26.4% YoY to ₹3,153.40 crore, while operating profit increased 35.35% to ₹2,225.37 crore. Earnings per share grew 44.34% YoY to ₹22.26, demonstrating exceptional profitability across all key metrics. The strong performance was supported by growth in net interest income, fee income and advances, along with significant improvement in asset quality. The bank's total business franchise crossed ₹6.4 lakh crore, growing 20.12% YoY. Total deposits rose 18.61% to ₹3.42 lakh crore, while gross advances crossed ₹3 lakh crore mark to reach ₹3.02 lakh crore, up 21.66% YoY. The CASA ratio improved 103 bps to 32.04%, with CASA balances increasing 22.56% to ₹1.09 lakh crore. Total other income hit a record ₹1,490.44 crore, up 37.73% year-on-year, aided by a sharp surge in treasury income. As per The Hindu BusinessLine, other income was up 38% YoY at ₹1,490 crore compared to ₹1,082 crore in Q2FY26, including fees earned from services, commission from non-fund-based banking activities, and recoveries from advances written off.
The bank's net interest margin expanded 26 basis points YoY to 3.32%, supported by a 40 bps decline in cost of funds and 39 bps reduction in cost of deposits to 5.18%. As reported by CNBC TV18, The Economic Times, and The Hindu BusinessLine, Federal Bank has reiterated its guidance for a 5-6 basis points improvement in net interest margins following its Q2 earnings, focusing on medium-yielding assets like gold loans and cards to drive growth while maintaining stable asset quality. The bank expects a further improvement of 5-6 basis points in NIM and has reiterated its guidance following its Q2 earnings call. Federal Bank is exploring overseas funding options, including external commercial borrowings (ECB) and overseas foreign currency borrowings (OFCB), with the window open until the end of December. It also has a $500 million medium-term note (MTN) programme ready and will tap the market if borrowing costs are favourable. As per The Hindu BusinessLine, KVS Manian, MD & CEO, stated that "Over the year our cost of funds fell faster (by 40 bps) than the lending yields (by 29 bps). It is this difference which also helped us widen the margins. So both on the liability and asset side is helping us improve our margins."
Asset quality strengthened significantly with gross NPA declining to 1.32% from 1.83% in the previous year, and net NPA falling to 0.17% from 0.48% sequentially. As per latest reports from CNBC TV18, The Economic Times, and The Hindu BusinessLine, Federal Bank said asset quality remains stable with fresh additions to gross non-performing assets (NPAs) were not concentrated in any particular segment and that overall asset quality remained healthy. The Provision Coverage Ratio, excluding technical write-offs, improved 1,333 basis points year-on-year to 86.78%. Including technical write-offs, the coverage ratio stood at 94.49%. Credit cost declined by 19 basis points year-on-year to 0.31%. The restructured loan book stood at ₹1,389.55 crore, equivalent to 0.46% of gross advances. Fresh slippages stood at ₹420 crore compared to ₹409 crore in the prior quarter, while the slippage ratio improved to 0.59% from 0.94% a year earlier. The bank reported almost no slippages in its corporate and commercial loan portfolios. The improvement in asset quality was a key highlight of the quarter, with both gross and net NPAs reaching their lowest levels in a decade. As reported by The Hindu BusinessLine, Venkatraman V, Executive Director, noted that "This is the highest quarterly profit in the bank's history, and that too it came in the second quarter. Usually, banks report higher quarterly profit in Q4, but this time in Q2 we have seen the highest profit ever for the bank...GNPAs and NNPAs are both at decadal lows."
Federal Bank is exploring investment opportunities across financial services, including the core banking and universal banking segments, as it continues to look for avenues for inorganic growth. However, the bank's management refrained from commenting on the size of any potential investment, stating that nothing is currently on the table. Speaking to CNBC TV18, Federal Bank said it had no comments on the possibility of acquiring Jana Small Finance Bank. CEO K V S Manian declined to give a specific answer regarding advance talks with Jana Small Finance Bank for a merger, but added that the banks continue to be interested in inorganic growth opportunities and evaluate various options. The management reiterated that it is constantly evaluating inorganic growth opportunities. The bank is also studying the Insurance Regulatory and Development Authority of India's (IRDAI) commission fee norms to assess their potential impact on its business. Regarding the impact of the insurance regulator's proposed consultation paper overhauling the distribution framework on the bank's fee income as well as on its life insurance arm, Ageas Federal Life Insurance, Manian stated that "There could be an impact, but it is too early to quantify. The bank will wait for the guidelines to be finalised and the implementation timeline to become clear." The bank's loan book was not showing signs of stress due to El Nino, while adding that it was monitoring the situation closely. Gold loans, which surged 37% in Q2, can rise further as well, a senior official said, pointing out that it can take the overall contribution from the sector to 20% of the overall book from the current 14.5%. The acquisition of foreign lender Standard Chartered's card portfolio will be completed by December, and the deal will add around 20% to its portfolio of cards. The overall capital adequacy stood at 16.84% in September against 16.97% in June. Federal Bank shares gained 0.6% to close at ₹337 apiece on the BSE, reflecting positive market sentiment toward the bank's exceptional results. Federal Bank shares have gained 26% in 2026 so far, though they declined 1.9% in the past month. Rekha Jhunjhunwala held 5,90,30,060 shares, or a 2.42% stake in Federal Bank, as per the latest shareholding data.
Return on assets (RoA) improved by 23 basis points year-on-year to 1.32% in the September quarter, while return on equity (RoE) increased by 256 basis points to 13.57%. Book value per share rose 17.48% year-on-year to ₹166.32. The cost-to-income ratio improved by 196 basis points to 52.08%, indicating a decline in operating expenses relative to operating income. The strong performance triggered a 0.6% rally in NSE-listed shares to ₹339, reflecting positive market sentiment toward the bank's exceptional results. Federal Bank shares gained post its second quarter results and were up 0.6% at ₹339 apiece at 1.30 pm. Federal Bank shares have gained 26% in 2026 so far, though they declined 1.9% in the past month. Rekha Jhunjhunwala held 5,90,30,060 shares, or a 2.42% stake in Federal Bank, as per the latest shareholding data. The bank's capital position, deposit franchise and lending mix are expected to support business growth as the interest rate environment changes.
