Kochi-based old-generation private sector lender Federal Bank on Friday recorded a net income of Rs1,386 crore for the September quarter, which is 45.10% higher than the same period last fiscal, buoyed by all-round show, especially fee income and interest income as its margin improved.
The biggest push came from treasury gains, which rose manifold. The bank said its gains from the treasury rose from a paltry Rs22 crore in Q2FY26 to a healthy Rs238 crore in the reporting quarter—something very different from other banks, which have so far announced their earnings for the period. Other banks are set to see huge dip in treasury income as the bond yields have been on fire during the period, rising by 44 bps through the quarter.
When asked for details, and how that was made possible the management led by KVS Manian during the concall on Friday refused to answer saying all the details and explanations are in the investor presentation, which unfortunately had only the numbers.
The bank also reported its best asset quality in a decade with both gross and net non-performing asset ratios, triggering an over 2% jump in shares to Rs 342.05.
Manian said the core net interest income, which is the difference between interest earned and interest paid, rose 26.4% on-year to Rs 3,153.4 crore, outpacing advances growth of 21.66%. The net interest margin, which is the key measure of profitability from the core lending business, widened 26 bps to 3.32%, while cost of deposits fell 39 bps to 5.18%.
Fee income climbed 31.86% to Rs 1,167.71 crore, reaching an all-time high as a proportion of average earning assets at 1.11%. Total other income hit a record Rs 1,490.44 crore, up 37.73%, aided by a sharp surge in treasury income, which Manian described due to low base effect.
On asset quality, gross NPAs declined to 1.32% from 1.83% a year ago, and net NPAs fell to 0.17% from 0.48%. Fresh slippages dropped 27.48% on-year. Total deposits stood at Rs 3,42,694 crore, up 18.61%, while gross advances crossed Rs 3-trillion-mark for the first time at Rs 3,01,688 crore. Casa balances grew 22.56% to Rs 1,09,803 crore, and the Casa ratio stood at 32.04%. Total business franchise Rs 6.4 trillion, growing 20.12%, executive director Venakatraman K said.
While the cost of funds declined by 40 bps, the cost of deposits fell by 39 bps to 5.18%, leading to a healthy operating profit that increased 35.35% to Rs 2,225.37 crore.
Among lending segments, gold loans grew 37.13%, loans against property increased 32.21, credit card advances rose 28.27% and commercial banking grew 25.46%, commercial vehicle and construction equipment loans increased 21.74%. Corporate and institutional advances rose 17.19%, while business banking returned to growth with a 12.39% increase.