**Federal Bank Reports Impressive Q3 Performance Driven by Loan Growth and Profitability**
Federal Bank has showcased remarkable performance for the quarter ending December, fueled by robust loan growth, enhanced asset quality, increased core income, and improved profitability. The private sector bank’s net profit surged by 9% year-on-year and quarter-on-quarter, reaching ₹1,041 crore in Q3FY26. Following this announcement, the bank’s shares climbed 8.6% to ₹268.20 on the National Stock Exchange.
Advances grew by 9% year-on-year to ₹2.65 trillion, primarily driven by strong activity in the commercial and corporate banking sectors. Meanwhile, deposit growth outpaced advances, rising 15% to ₹2.50 trillion. Management expressed optimism about sustaining this momentum on both asset and liability fronts, anticipating growth in the high teens.
Retail loans, which account for 55% of the bank’s customer assets, increased by 9% year-on-year to ₹94,886 crore. The commercial loan portfolio saw a significant rise of 25% year-on-year to ₹28,177 crore, while corporate loans grew by 5% to ₹1.42 trillion. In addition to the commercial segment, the bank’s gold loan business expanded by 9% quarter-on-quarter, with credit cards and commercial vehicle loans each increasing by 6%. Loans against property rose over 4%, although microfinance institution loans experienced a slight decline of 1%. The bank aims to grow its personal loan and MFI portfolios cautiously moving forward.
The bank’s asset quality continued to improve, with the gross non-performing assets (NPA) ratio decreasing to 1.72% from 1.83% in the previous quarter. The net NPA also fell to 0.42% from 0.48%, attributed to lower slippages of ₹435 crore at the end of December, compared to ₹579 crore in the prior quarter.
Net interest income rose over 9% year-on-year and 6% quarter-on-quarter to ₹2,653 crore. Consequently, the net interest margin improved by 12 basis points sequentially to 3.18%, driven by enhancements in the bank’s liability mix and asset repricing. Managing Director and CEO K.V.S. Manian noted that improvements in CASA ratios and reduced deposit costs contributed to this positive trend.
However, Manian anticipates that the impact of the Reserve Bank of India’s recent 25 basis points repo rate cut will fully materialize in the next quarter. He emphasized the need to strategize on mitigating this impact moving forward.
As of December, the current account and savings account (CASA) ratio improved to 32.07%, reflecting a 106 basis point increase.
**FAQ**
**What factors contributed to Federal Bank’s strong Q3 performance?**
Federal Bank’s strong Q3 performance was driven by significant loan growth, improved asset quality, higher core income, and enhanced profitability, resulting in a 9% increase in net profit.
