Federal Bank Q3 Results: Net Profit Crosses Rs 1,040 Cr, NPAs Hit Decade Lows

For the quarter that ended on December 31, 2025 (Q3 FY26), Federal Bank reported a solid performance that was characterized by consistent margin growth, improving profitability, strict cost control, and further improvement of asset quality.

At Rs 1,041.21 crore, net profit showed a strong 9% QoQ growth over the previous quarter. Stronger core income and better operational leverage drove this rise, demonstrating the bank's ability to increase earnings while keeping costs under control.

The consistent growth in core earnings was one of the quarter's main highlights. Net Interest Income (NII) grew by 9.11% YoY and 6.31% quarter on quarter to reach Rs 2,652.73 crore. A favorable change in the liability mix and better asset repricing contributed to the improvement. Consequently, the bank's margin-led growth strategy was strengthened as Net Interest Margin (NIM) increased by 12 basis points sequentially to 3.18%.

Gross non-performing assets (NPA) and net non-performing assets (NPA) both fell to decadal lows as asset quality continued to improve. Net NPA increased to 0.42% while gross NPA remained at 1.72%, highlighting consistent risk management and efficient credit monitoring. Confidence in the bank's loan book quality was further reinforced by lower slippages and steady recoveries.

The strengthening balance sheet was complemented by lower funding costs, with the cost of deposits easing to 5.48% and the overall cost of funds declining to 5.50%, providing additional support to margins. On the balance sheet front, total business reached Rs 5,53,364.49 crore, growing 3.71% quarter-on-quarter and 11.40% year-on-year.

The Commercial Banking and Corporate & Institutional Banking categories were the main drivers of advances, which increased to Rs 2,55,568.67 crore, up 4.46% QoQ and 10.94% YoY. With a consistent 3.07% QoQ and 11.80% YoY growth, deposits reached Rs 2,97,795.82 crore.

The CASA ratio increased to 32.07%, up 106 basis points QoQ and 191 basis points YoY, significantly strengthening the liability profile. The bank was able to reduce funding costs and enhance margin sustainability over the medium term thanks to the robust 18.86% YoY growth in CASA balances.

The cost-to-income ratio improved to 53.92%, demonstrating continuous operating leverage and cost discipline, while operational efficiency showed steady improvement.

Commenting on the performance, Mr. KVS Manian, Managing Director & CEO, said: "Our Q3 performance reflects the continued strengthening of the Bank's underlying fundamentals. The improvement in margins, reduction in funding costs, and sustained stability in asset quality are the direct outcome of the balance-sheet discipline and execution focus we have maintained over the past few quarters. We are seeing increasing benefits from a stronger liability franchise and a calibrated shift in our asset mix toward segments that deliver superior risk-adjusted returns."

"At the same time, cost discipline and prudent risk management remain central to how we operate. While competitive intensity remains high, our emphasis is on consistency and quality of earnings rather than headline growth. We believe this approach positions the Bank well to deliver sustainable performance across market cycles."

In keeping with its gradual and market-focused development strategy, the bank opened six new branches during the quarter.