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Informist, Friday, Oct. 16, 2026

 

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--Federal Bank: Evolving interest rate cycle to give extra support to business 
--CONTEXT: Comments by Federal Bank's mgmt in post-earnings analyst concall 
--Federal Bk: To continue focusing on revenue growth faster than cost growth 
--Federal Bank: Competition for deposits to intensify going forward 
--Federal Bank: Remain watchful of weather shocks 
--Federal Bank: Have been cautious with agri, microfinance loans 
--Federal Bk: Don't see impact on asset quality from weather shocks currently 
--Federal Bank: Q2's treasury bonanza may not repeat in Q3 
--Federal Bank: NIM to grow by average 5-6 bps/qtr over next few qtrs 
--Federal Bank: Keen on focusing on mid-yield assets

 

By Priyasmita Dutta and Janwee Prajapati

 

NEW DELHI/MUMBAI – The robust treasury income seen in the September quarter may not repeat in the December quarter, Federal Bank Ltd. Managing Director and Chief Executive Officer K.V.S Manian said in a post-earnings call with analysts Friday. "Can we assume that the same will repeat? It may not repeat," Manian said.

 

For the quarter ended Sept. 30, the bank's treasury income totalled INR 2.38 billion, which was more than double the year-ago income. Sequentially, treasury income was nearly 10-fold of what it was in the trailing quarter. 

 

The healthy jump in treasury income, along with interest income, helped Federal Bank report the sharpest jump in its net profit in 38 quarters in Jul-Sept. The bottom line was INR 13.86 billion for the September quarter, up over 45% on year and nearly 18% on quarter.

 

MARGIN VIEW

The Kerala-based lender will remain focused on ensuring its revenue grows at a faster clip than its costs, Manian said. However, the bank will be investing in technology, new branch openings and other initiatives which will position it well for the future. "A stronger liability franchise combined with disciplined asset growth is helping sustain our net interest margin trajectory," he added. "And we remain confident in its underlying resilience."

 

The lender reported a net interest margin of 3.32% for the September quarter against 3.33% for the June quarter. On the trajectory for the net interest margin, he said the bank has retained the guidance of an improvement of 5–6 basis points per quarter over the next few quarters. Going ahead, Manian said Federal Bank will focus on mid-yielding assets. 

 

"The evolving interest rate cycle should provide an additional supportive factor as we move forward," Manian said. The Reserve Bank of India's Monetary Policy Committee earlier this month raised the policy repo rate for the first time in over three years by 25 bps to 5.50%. The panel had lowered the repo rate by a cumulative 125 basis points in 2025, the most in a calendar year since 2019. It had last raised interest rates in February 2023.

 

As banks reprice deposits following the rate hike, Manian said competition for deposits will intensify. The bank's total deposits grew by 19% on year to INR 3.42 trillion as on Sept. 30, and its net advances grew 22% to INR 2.98 trillion, showing a steady growth in its business performance. 

 

Manian said while advances have been robust, the bank has been cautious with agriculture and microfinance loans, given the risks to these segments from weather-related and other macroeconomic shocks. "If you look at our agri book, we have not pushed the pedal on that...our microfinance book, we have not pushed the pedal on that," he said. "So therefore, we have been cautious about some of those segments."

 

"And we continue to watch the outcomes of El Nino, geopolitics, all of that, interest rate scenario, inflation, all of that," he said, adding that the bank does not see any impact on its asset quality currently. The bank's asset quality improved slightly in Jul-Sept, where its net non-performing assets were 0.17% as on Sept. 30, while it was 0.18% a quarter ago. Gross non-performing assets were at 1.32% as on Sept. 30, down from 1.52% a quarter ago.  End

 

Edited by Shubhayan Bhattacharya

 

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