Net profit surges 45% to ₹1,386 crore as lender crosses major business milestones; NPAs fall to decade-low levels
Mumbai, October 16, 2026: Federal Bank has delivered its strongest quarterly performance on record, reporting a net profit of ₹1,386.09 crore for the second quarter of FY27, marking a robust 45.10 percent year-on-year growth and underscoring the success of its core banking strategy.
The private sector lender not only recorded its highest-ever quarterly profit but also crossed key milestones during the quarter, with its total business franchise exceeding ₹6.4 lakh crore and gross advances surpassing the ₹3 lakh crore mark for the first time.
The performance reflects broad-based growth across key business segments, improved margins, rising fee income, and a significant strengthening of asset quality, positioning the bank strongly for the second half of the financial year.
Core Banking Business Drives Growth
Federal Bank's earnings momentum was powered primarily by the expansion of its core banking operations. Net Interest Income (NII), a key measure of lending profitability, rose by 26.38 percent year-on-year to ₹3,153.40 crore, outpacing overall advances growth.
The bank also witnessed a substantial increase in fee-based revenues. Fee income grew 31.86 percent to an all-time high of ₹1,167.71 crore, contributing to a record other income figure of ₹1,490.44 crore, up nearly 38 percent from the corresponding quarter last year.
Operating profit increased by 35.35 percent to ₹2,225.37 crore, while earnings per share climbed 44.34 percent to ₹22.26.
Asset Quality Reaches Decadal Best
One of the most notable highlights of the quarter was the continued improvement in asset quality.
Federal Bank reported its lowest gross and net non-performing asset (NPA) levels in a decade, with Gross NPA declining to 1.32 percent and Net NPA coming down to 0.17 percent.
The strengthening of the loan book was supported by lower slippages, which declined 27.48 percent year-on-year, while the slippage ratio improved to 0.59 percent, compared with 0.94 percent a year earlier.
The bank's Provision Coverage Ratio, excluding technical write-offs, improved to 86.78 percent, offering an added cushion against potential credit risks. Coverage including technical write-offs stood at 94.49 percent.
The restructured loan portfolio also reduced significantly, accounting for just 0.46 percent of gross advances, reflecting the resilience of the bank's lending book.
Margins Improve Despite Competitive Environment
Federal Bank's profitability metrics received support from improving margins and declining funding costs.
Net Interest Margin (NIM) expanded by 26 basis points year-on-year to 3.32 percent, while the cost of funds dropped by 40 basis points. Cost of deposits also moderated to 5.18 percent, helping improve overall lending spreads.
The bank further strengthened operational efficiency, with its cost-to-income ratio improving by 196 basis points to 52.08 percent.
Business Franchise Scales New Heights
Federal Bank's overall business crossed ₹6.44 lakh crore, registering a growth of 20.12 percent over the previous year.
Total deposits rose 18.61 percent to ₹3.43 lakh crore, while gross advances grew 21.66 percent to ₹3.02 lakh crore.
The bank's CASA (Current Account Savings Account) franchise continued to deepen. CASA balances increased 22.56 percent to ₹1.10 lakh crore, surpassing the growth rate of the overall deposit book. Consequently, the CASA ratio improved to 32.04 percent.
Federal Bank also reported strong traction in its non-resident business. NR deposits reached ₹1.19 lakh crore, growing 26.63 percent, while FCNR(B) deposits registered an exceptional 239 percent increase.
Growth Led by High-Yield Segments
The bank's focus on granular, high-yield lending segments continued to deliver results.
Among the standout performers:
- Gold loans grew 37.13 percent
- Loan Against Property (LAP) rose 32.21 percent
- Credit card business expanded 28.27 percent
- Commercial banking grew 25.46 percent
- Commercial Vehicle and Construction Equipment financing increased 21.74 percent
- Corporate and Institutional Banking grew 17.19 percent to more than ₹1.04 lakh crore
- Business Banking returned to double-digit growth at 12.39 percent
These segments are contributing not only to growth but also to profitability and risk diversification.
Returns and Capital Position Strengthen
The bank's return ratios improved significantly during the quarter.
Return on Assets (RoA) increased to 1.32 percent, while Return on Equity (RoE) improved to 13.57 percent. Book value per share rose 17.48 percent year-on-year to ₹166.32.
Meanwhile, Federal Bank maintained a comfortable capital position, with Capital Adequacy Ratio (CRAR) at 16.84 percent and Tier-I capital at 15.76 percent, providing ample room to support future growth.
The bank also expanded its physical presence by adding 12 new branches during the quarter, taking its network to 1,662 banking outlets across the country.
Leadership Confident of Sustained Momentum
Commenting on the results, KVS Manian, Managing Director & CEO of Federal Bank, described the quarter as a landmark period for the institution.
According to Manian, the record profit, growth in core income streams, rising fee income, and decade-low NPAs demonstrate that the bank is successfully balancing rapid growth with disciplined risk management.
He emphasized that the bank's chosen business segments, along with the strengthening CASA and non-resident franchises, continue to gain momentum. With a healthy capital base, granular balance sheet and improving interest-rate environment, the lender expects to enter the second half of FY27 from a position of strength.
Outlook
Federal Bank's latest results signal a bank that is not only growing rapidly but doing so with improving asset quality, stronger profitability, and increasing operating efficiency. With record earnings, expanding market presence, and one of the strongest balance sheets in recent years, the lender appears well placed to capitalize on emerging opportunities in India's growing banking landscape.