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Informist, Monday, Apr. 27, 2026

By Pratiksha

NEW DELHI – Federal Bank's net profit is seen rising on year in the March quarter due to income tax refund worth almost INR 15 billion, according to brokerages tracking the lender. However, boost to the bank's bottom line may be limited as it may redirect the tax refund amount to strengthen its provision buffer, analysts said. 

The Kerala-based-lender's net profit is expected to rise 18% on year to INR 12.14 billion in the reporting quarter, according to the average of estimates from 12 brokerages. Sequentially, the net profit is expected to rise 16%.

Prabhudas Lilladher Pvt. Ltd. has the lowest estimate for the bank's net profit for the March quarter at INR 6.82 billion while Nomura Equity Research has the highest at INR 22.30 billion. The bank will detail its March quarter financial results on Wednesday.

"IT refund of ~INR 15 billion is expected to materially boost 4Q PAT," Nomura said in a pre-earnings report. "The bank can use it to make provision buffers," it added. Federal Bank received around INR 15 billion worth of refund from the income tax department between February and March.

Brokerages expect the private-sector bank's provisions to surge on year in the reporting quarter, with Elara Securities Ltd. seeing the biggest jump of almost 13 times on year to INR 18.32 billion.

Brokerage Prabhudas Lilladher expects the lender's provisions to surge almost 128% on year to INR 3.14 billion in Jan-Mar, while both Kotak Securities and Nuvama Wealth Management sees it rising 142% on year to INR 3.3 billion.

However, provisions are expected to fall on a quarter-on-quarter basis, brokerages said. Federal Bank's provisions were at INR 1.38 billion in Jan-Mar 2025.

Strong growth in net interest income is also expected to boost the lender's bottom line, brokerages said. The bank's net interest income--the difference between interest earned and expended--for Jan-Mar is expected to have risen 28% on year to INR 30.46 billion, according to the average of estimates from 12 brokerages. The bank's net interest income had risen 9% on year to INR 26.53 billion in the December quarter.

"NII growth will be slightly higher than average loan growth due to rise in yield on advances outpacing cost of deposits," YES Securities said in a pre-earnings report. "Consequently, NIM will be slightly higher sequentially."

Most brokerages expect the lender's net interest margin to expand 5-27 basis points on year in the quarter under review. Its net interest margin was 3.18% in the December quarter. However, sequentially, margin is expected to be broadly stable, they said.

However, Federal Bank Managing Director K.V.S. Manian had said in a post-earnings press conference in January that margins are likely to come under pressure in the March quarter as the full impact of the policy rate cuts by the Reserve Bank of India's Monetary Policy Committee feeds through the loan book.

Brokerages will keep an eye on the bank's guidance for loan and deposit growth and net interest margin. "Commentary on adjusted NIM trajectory and sustainability of core earnings growth into FY27 will be key," Nomura said.

Shares of the bank have risen almost 9% since it declared its earnings for the December quarter on Jan. 16. On Monday, shares of the bank ended 0.4% higher at INR 294.05 on the National Stock Exchange. Of the 15 brokerage reports on the bank available with Informist, 13 have a 'buy' recommendation with an average target price of INR 288 per share and two have a 'sell' call with an average target price of INR 293. 

Following are the Jan-Mar earnings estimates for Federal Bank from 12 brokerages in descending order of the estimate of net profit in INR billion:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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