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Revenue
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Revenue YoY
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reported change
EBITDA
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record provenance
Actual signal trajectory
Where this quarter sits.
Quarter read
What the record says.
Federal Bank reported a solid Q2 FY26 with NIM improving 12 bps QoQ to 3.06%, driven by a 19 bps reduction in deposit costs and a 120 bps YoY improvement in average CASA ratio. Fee income grew 13% QoQ, pushing the fee-to-average assets ratio above 1% for the first time. Credit cost moderated to 50 bps (vs 65 bps in Q1), though management maintained full-year guidance of 55 bps due to lingering MFI stress. Loan growth was modest at ~1.5% QoQ as the bank deliberately slowed low-yield corporate and home loans while growing high-yield segments like commercial banking (late 20% YoY) and gold loans (7% QoQ ex-DGB). Management guided for continued NIM improvement from deposit repricing tailwinds and asset mix shift. A board meeting on Oct 24 will consider a capital raise, though details were not disclosed. Key risk: MFI stress, while easing, remains above comfortable levels and could delay credit cost normalization.
Colored figures show movement against the previous available record.
Guidance to track
- Management reiterated full-year credit cost guidance of 55 bps despite Q2 coming in at 50 bps, citing lingering MFI stress.
- Deposit repricing tailwinds over next two quarters and asset mix shift should support continued NIM improvement.
- Board meeting scheduled for October 24 to discuss capital raise; details and rationale to be disclosed post-meeting.
Risks flagged
- MFI slippages, while easing month-on-month, remain above comfortable levels and could delay credit cost normalization.
- Management declined to comment on the rationale for a potential capital raise, raising concerns about dilution or capital-intensive expansion.
- Loan growth of ~1.5% QoQ was half the system rate, partly due to deliberate slowdown in low-yield assets; growth may lag if high-yield segments don't accelerate.
Key quotes
- Our CASA growth this quarter has been very encouraging, both sequentially and year-on-year. Even more importantly, the average CASA balances have risen meaningfully, even more than what the EOPs reflect, showing that the growth is not just at the quarter end but sustained.
- Our fee-to-average assets ratio crossed 1% for the first time, a milestone we have been targeting for some time.
- I am not yet in the comfortable zone on MFI. I do not know how that plays. After we get a comfort on that side, we can consider on revising our guidance.
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