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Informist, Thursday, Jul. 16, 2026

 

By Divya Moolayattil

 

MUMBAI – Federal Bank Ltd. is expected to post double-digit year-on-year rise in net profit for the June quarter on the back of steady growth in loans and net interest margin. However, net profit is likely to fall sharply on quarter due to a surge in slippages from the stressed retail and microfinance portfolio, analysts said.  

 

The Kerala-based lender's net profit is estimated to rise nearly 35% on year to INR 11.63 billion for the June quarter, according to the average of estimates from 14 brokerages. However, the net profit is estimated to fall 8% on quarter. The highest estimate for net profit of the bank is INR 13.57 billion from YES Securities (India) Ltd. and the lowest estimate is INR 10.23 billion from Prabhudas Lilladher Pvt. Ltd. Prabhudas Lilladher and Systematix Shares and Stocks (India) Ltd. expect the bank's provisions to fall 17% on year to INR 3.34 billion in Apr-Jun. The lender reported provisions of INR 7.41 billion in the previous quarter. Provisions are expected to drop sequentially due to a one-time floating provision of INR 4.56 billion, according to Systematix.

 

Federal Bank is likely to see a slippage ratio of around 1% of total loans in the June quarter, down 7 basis points on year but up 26 basis points on quarter, according to Kotak Securities Ltd. The bank had reported fresh slippages of INR 4.74 billion in the March quarter, with retail slippages holding the highest share at INR 2.21 billion.

 

Federal Bank's net interest income--the difference between interest earned and interest expended--for the June quarter is expected to rise nearly 23% on year but fall 10% on quarter to INR 28.71 billion, as per the average of 14 estimates. The highest estimate for the bank's net interest income is INR 32.44 billion from YES Securities. The lowest estimate is INR 27.30 billion from Dolat Capital Market Pvt. Ltd. Sequentially, the bank's net interest income is likely to fall as elevated funding costs continue to weigh on margin, according to Elara Securities (India) Pvt. Ltd.

 

Federal Bank's net interest margin for the June quarter is expected to fall sharply on quarter and rise on year. Seven brokerages expect the bank's net interest margin to fall around 54 basis points on quarter as the cost of deposits fell marginally, but Nomura expects the net interest margin to rise marginally due to improvement in mid-yielding segments and lower credit costs. The net interest margin is likely to rise sharply on year to around 24 basis points. 

 

The private-sector lender's advances are expected to be around INR 2.70 trillion as of June, a rise in the range of 11.0-12.5% on year and 2-3% on quarter, as per the average of six estimates. However, the bank's loan growth is likely to be lower than the average industry growth, which is estimated at 18% on year and 4% on quarter. Deposit growth is likely to be on a par with growth in advances for Federal Bank during the reporting quarter, up around 12% on year and 3% sequentially at INR 3.15 trillion, according to the average of five estimates.

 

Gross non-performing assets are expected to fall by about 3 bps sequentially and 27 bps on year, according to Prabhudas Lilladher. Credit costs are likely to decline by up to 45 bps on quarter and up to 15 bps on year for the reporting quarter, according to the average of five estimates.

 

Federal Bank will report its June quarter earnings Friday. The trajectory of retail deposit mobilisation, margin outlook, and evolving asset quality environment will remain the key focus, particularly amid the uncertain geopolitical backdrop. Thursday, shares of Federal Bank closed at INR 326.60 apiece on the National Stock Exchange, down 0.3% from Wednesday. The stock is up 15% since Apr. 29 when the company announced its March quarter earnings.

 

Of the 17 brokerage reports on the bank available with Informist, 13 have a "buy" recommendation on the stock with an average target price of INR 322. This is 1.5% lower than the current market price. Two brokerages have a "hold" recommendation with an average target price of INR 293. Two have a "sell" recommendation with an average target price of INR 290.

 

Following are the June quarter earnings estimates of Federal Bank from 12 brokerages, in descending order of the estimate for net profit, in INR billion:

 

Brokerage	Net Interest Income	Net Profit
YES Securities (India) Ltd.	32.44	13.57
Elara Securities (India) Pvt. Ltd.	29.03	12.15
Nuvama Wealth Management Ltd.	28.26	12.15
Nomura Equity Research	28.40	12.00
IDBI Capital Market Services Ltd.	29.77	11.95
Dolat Capital Market Pvt. Ltd.	27.30	11.70
Ambit Capital Pvt. Ltd.	28.28	11.63
Nirmal Bang Equities Pvt. Ltd.	28.30	11.61
JM Financial Institutional Securities Pvt.  Ltd.	28.90	11.50
Motilal Oswal Financial Services Ltd.	28.06	11.38
Kotak Securities Ltd.	28.54	11.12
Systematix Shares and Stocks (India) Ltd.	28.06	11.08
Bank of America Global Research	28.84	10.71
Prabhudas Lilladher Pvt Ltd.	27.71	10.23
Average	28.74	11.63

 

End

 

Edited by Shubhayan Bhattacharya

 

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