Federal Bank Q2 results: Net profit soars 45% YoY to ₹1,386 crore, asset quality improves

In the corresponding period of the preceding fiscal year, the Bank had logged a profit of ₹955.26 crore, according to a regulatory filing.

Its net interest income (NII) jumped 26.4% YoY to ₹3,153.40 crore during the quarter under review, compared with ₹2,495.24 crore in the second quarter of the 2025-26 fiscal year (Q2 FY26), ahead of advances growth of 21.66%.

The Federal Bank saw its net interest margin (NIM) expand by 26 basis points (bps) YoY to 3.32% in Q2 FY27. Furthermore, its cost of deposits declined 39 bps YoY to 5.18%, and its cost of funds fell 40 bps YoY.

Asset quality improves

The Bank also saw its asset quality improve, as its gross non-performing assets (GNPA) declined by 20 bps quarter-on-quarter (QoQ) to 1.32% in the quarter ended September 30, 2026, from 1.52% in the quarter-ago period.

Its net non-performing assets (NNPA) contracted marginally by 1 bps QoQ to 0.17% for the reporting quarter, as against 0.18% in the fourth quarter of FY27.

Both its GNPA and NNPA were at their decadal low, the Bank said in its press release, adding that its slippage ratio improved to 0.59% from 0.94% a year ago.

Its restructured book reduced to ₹1,389.55 crore, or 0.46% of gross advances.

“The Bank’s balanced approach to risk and its continued shift towards secured, granular segments provide a meaningful buffer against external uncertainty,” it further stated.

Other highlights

Its Current Account and Savings Account (CASA) balances reached ₹1.10 lakh crore, up 22.56% YoY and growing faster than the overall deposit book.

The CASA ratio improved 103 bps YoY to 32.04%, and the average CASA crossed ₹1 lakh crore.

Its total business franchise stood at over ₹6.4 lakh crore in the July-September quarter of FY27, marking a 20.12% YoY increase.

Its total deposits were at ₹3.43 lakh crore, up 18.61% YoY, while gross advances crossed ₹3 lakh crore to reach ₹3.02 lakh crore, which rose 21.66% YoY.

During the quarter, Federal Bank added 12 branches, taking the network to 1,662 banking outlets.

What the CEO said

Commenting on the earnings, KVS Manian, Managing Director & CEO of Federal Bank, said: “This quarter marks several milestones for the Bank: our highest-ever profit, our total business franchise now stands at over ₹6.4 lakh crore, and advances crossing ₹3 lakh crore. More importantly, the growth is coming from the core. Net interest income grew 26%, and fee income 32%, and fee income relative to our earning assets is at an all-time high.”

Manian further stated that the Bank’s gross and net NPA are at their lowest levels in a decade, slippages are down 27%, and provision coverage stands at 87%. “We are growing faster while keeping the quality of the book intact,” he said.

“Our chosen segments are delivering as intended, and the CASA and NR franchises continue to deepen. As the rate environment turns, we enter the second half of the year with a strong capital position, a granular balance sheet and good momentum in our core business,” Manian added.

Shares of Federal Bank surged as much as 2.9% to hit an intraday high of ₹344.80 apiece on the National Stock Exchange (NSE) after reporting strong Q2 numbers.

The Federal Bank has a total market capitalisation of ₹83,230.03 crore as of October 16, 2026, according to data on the NSE.