Federal Bank Q2: Net profit drops 10%; bank says asset quality among best in decade

Sequentially, net profit rose 10.85%, driven by robust operating income and efficient cost management.

The bank’s net interest income during the period grew 5.4% to ₹2,495 crore as against ₹2,367 crore year-on-year (YoY). The net interest income (NII) is one of the key metrics to assess a banking or financial entity's financial performance.

The Federal Bank’s asset quality remained among the best in the decade, with GNPA at 1.83% and NNPA at 0.48%.

Federal Banks’ gross NPA at the end of Q2 FY26 stood at ₹4,532.01 crore, which as a percentage of gross advances stood at 1.83%.

As of September 30, the bank’s Net NPA stood at ₹1,165.16 crore, accounting for 0.48% of net advances. The Provision Coverage Ratio (excluding technical write-offs) was 73.45%.

“Our asset quality remains solid, supported by prudent risk management and a balanced approach to growth. As we look ahead, we’re shaping an organisation that’s agile in its thinking, disciplined in its actions, and firmly anchored in the stability and values that define Federal Bank,” said KVS Manian, Managing Director and CEO, The Federal Bank.

The bank’s total income for the quarter under review rose 3.75% year-on-year to ₹7,824.33 crore. The annualised earnings per share (EPS) stood at ₹15.42 for the quarter, while the net interest margin (NIM) was maintained at 3.06%.

Net Interest Margin (NIM) improved 12 basis points (bps) to 3.06% QoQ.

The current account savings account (CASA) ratio improved to 31.01%, up 94 bps YoY, while CASA deposits grew 10.71% YoY to ₹89,591 crore in Q2 FY26.

“Our CASA franchise continues to demonstrate sustained and meaningful growth, reflecting the trust of our customers and the consistency of our team’s execution. We’re also broadening our asset mix thoughtfully, increasing the share of our mid-yield portfolio in a measured and disciplined way. At the same time, our fee income has seen strong, double-digit sequential growth, underscoring the breadth and resilience of our earnings,” said Manian.

Federal Bank’s total deposits increased by 7.36% during the quarter, while total net advances also grew 6.23% YoY, reflecting balanced franchise growth.

The bank’s total business reached ₹5,33,576.64 crore, registering a year-on-year growth of 6.84%. Its net worth rose 11.93% YoY to ₹34,819.84 crore as of September 30, 2025, compared with ₹31,108.20 crore a year earlier.

The Capital Adequacy Ratio (CRAR) of the bank, computed as per Basel III guidelines, stood at 15.71% as at the end of the quarter.

The bank operates a total of 1,595 outlets, while the number of ATMs and cash recyclers stood at 2,082 (including mobile ATMs) as of September 30, 2025.

“Having spent over a year in this role, I have a deep sense of conviction about where the Bank stands today and the direction we’re headed. Over the past few quarters, we’ve undertaken several strategic reorientations to strengthen our foundation and build for the future—and the results are beginning to show,” Manian added.

On Friday, shares of The Federal Bank settled at ₹212.50 apiece, falling 0.93%.