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Informist, Thursday, Jan. 15, 2026

 

By Divya Moolayattil

 

MUMBAI - Federal Bank Ltd. is expected to post a single-digit year-on-year rise in net profit for the December quarter on the back of steady loan growth and strong other income, even as net interest margin remains under pressure, according to analysts.

 

The Kerala-based lender's net profit is expected to rise over 5% both on year and on quarter to INR 10.07 billion for the December quarter, according to the average of estimates from 12 brokerages. Nirmal Bang Equities Pvt. Ltd. has the highest estimate for the company's December quarter net profit of INR 10.75 billion and Prabhudas Lilladher Pvt. Ltd. has the lowest estimate of INR 9.68 billion. Federal Bank will report its December quarter earnings Friday.

 

The bank's December quarter net interest income is expected to rise more than 5% on year and 2.5% on quarter to INR 25.56 billion, as per the average of estimates. Elara Securities Ltd. has the highest estimate for the bank's net interest income at INR 26.05 billion and Motilal Oswal Financial Service Ltd. has the lowest estimate at INR 25.16 billion. Sequentially, the bank's net interest income growth is likely to be slower than average loan growth due to the fall in yield on advances outpacing the fall in the cost of deposits, according to YES Securities.

 

Federal Bank's December quarter net interest margin is expected to remain largely stable on quarter and fall marginally on year. Six brokerages expect the bank's net interest margin to fall around 4 basis points on year while Prabhudas Lilladher expects a sharp decline of 20 bps. The net interest margin is likely to be largely stable on quarter as the decline in interest on deposits offsets the fall in interest earned on the bank's assets. Bank interest rates have been falling after the Reserve Bank of India's cumulative 125 bps cut in its key repo rate in 2025. 

 

Federal Bank's other income is estimated to rise about 17% year-on-year to nearly INR 10.74 billion, though it is expected to decline marginally on a sequential basis, according to the average of estimates from four brokerages. Nuvama Wealth Management is an outlier and estimates a sharper 38% year-on-year growth in the bank's other income.

 

The private sector lender's advances are expected to be around INR 2.53 trillion at the end of December, a rise in the range of 8.5-10.0% on year and 0.5-3.5% on quarter, as per the average of estimates from five brokerages. However, the bank's loan growth is likely to be lower than the average industry growth, which is estimated at 12% on year and 4.5% on quarter. Deposits are expected to have grown faster than advances during the reporting quarter, rising 9-12% on year and 1-3% sequentially to INR 2.90 trillion-INR 2.97 trillion, according to estimates from four brokerages.

 

The bank's operating expenses in the December quarter are estimated at INR 19 billion-INR 20 billion, a year-on-year increase of 9.0–12.5%. Sequentially, operating expenses are expected to rise around 5%, with employee and other operating expenses seen largely under control, according to three brokerages.

 

The bank's December quarter provisions are expected to decline sequentially by 13-15% to around INR 3 billion, but will be up 5-7% on year, according to estimates from three brokerages. Nuvama expects a much higher on-year rise in the bank's provisions at 19% but did not provide any reasoning for this. Gross non-performing assets are expected to rise by about 6 bps sequentially and 19 bps on year, while credit costs are likely to decline by up to 11 bps on quarter and up to 2 bps on year for the reporting quarter, according to Prabhudas Lilladher.

 

Of the 26 brokerage reports on the bank available with Informist, 23 have a 'buy' recommendation on the stock with an average target price of INR 235. This is 4.47% lower than the current market price. Two brokerages have a 'hold' recommendation with an average target price of INR 203 and only one has a 'sell' recommendation with an average target price of INR 210.

 

Trajectory of deposit repricing, retail deposit mobilisation, credit growth momentum, trend of return on assets, and impact of RBI repo rate cuts on net interest margin will be the key developments analysts will monitor. Shares of Federal Bank are up 8.2% since its September quarter earnings. On Wednesday, shares of the company closed 1% lower at INR 246.85 on the National Stock Exchange.

 

Following are the December quarter earnings estimates of Federal Bank from 12 brokerages in descending order of the estimate of net profit in INR million:

Brokerage	NII	Net Profit
Nirmal Bang Equities Pvt. Ltd.	25,843	10,745
Emkay Global Financial Services Ltd.	25,317	10,401
ICICI Securities Ltd.	25,895	10,370
Elara Securities (India) Pvt. Ltd.	26,051	10,234
Systematix Shares and Stocks (India) Ltd.	25,255	10,093
Sharekhan Ltd.	25,680	10,050
Nuvama Wealth Management Ltd.	25,600	10,000
YES Securities (India) Ltd.	25,292	9,936
JM Financial Institutional Securities Pvt. Ltd.	25,648	9,899
Kotak Securities Ltd.	25,700	9,772
Motilal Oswal Financial Services Ltd.	25,175	9,701
Prabhudas Lilladher Pvt. Ltd.	25,453	9,677
Average	25,575.75	10,073.17

 

End

 

Edited by Ashish Shirke

 

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