Federal Bank released its financial results for the first quarter of the financial year 2025–26, and the performance presents a mixed picture. On one hand, the bank’s core business is performing strongly, but on the other hand, the profit has dropped. The main reason for this decline in profit is an increase in provisions.
Net Profit Falls Despite Good Business
Federal Bank reported a net profit of ₹861.75 crore for the April to June 2025 quarter. While this is still a good amount, it’s 16.31% less than the last quarter. This means the bank made less profit now than it did in the previous three months.
What Are Provisions?
Provisions are like a safety net. Federal Bank give loans to many people and businesses. Sometimes, borrowers are not able to repay the money. To be safe, banks keep aside a part of their earnings so they can absorb any losses in the future. This money is called a provision.
In this quarter, Federal Bank had to increase its provisions, especially for agriculture and microfinance (MFI) loans. These are considered riskier sectors. Because of these increased provisions, even though the bank earned well, its final profit came down.
Good Performance in Core Operations
Even though profit fell, the bank did well in its regular business activities. Its operating profit stood at ₹1556.29 crore, which shows that the bank’s daily work is strong and growing.
The Net Interest Income (NII), which is the main income from loans, was ₹2336.83 crore. This is 1.96% more than the same time last year, showing steady progress.
The bank reported a total income of ₹7799.61 crore for the quarter, marking a 7.64% increase year-over-year. This means the bank’s total earnings from all sources are increasing.
Earnings Per Share and Margins
The Earnings Per Share (EPS), which shows how much profit each share earned, was ₹14.07 (annualized). This is a healthy number and indicates that the bank is still rewarding its shareholders.
The Net Interest Margin (NIM) was 2.94%, which is considered decent in the banking industry. It shows how efficiently the bank is earning interest income after covering its costs.
Growth in Deposits and Advances
Deposits are the money that customers keep in the bank. In this quarter, total deposits reached ₹287,436.31 crore, which is 8.03% higher than the same quarter last year. This growth means more people trust the bank with their money.
Similarly, the bank’s total loans (called net advances) also grew. The net advances increased from ₹220,806.64 crore last year to ₹241,204.34 crore this year. This is a growth of over 9%, which is a positive sign.
Different types of loan segments also showed strong growth:
Retail Loans grew by 15.64% to ₹81,046.54 crore
Business Banking Loans rose by 6.29% to ₹19,193.95 crore
Commercial Banking Loans jumped by 30.28% to ₹25,028 crore
Corporate Loans grew by 4.47% to ₹83,680.44 crore
CV/CE Loans (for vehicles and equipment) increased by 30.31% to ₹4,858 crore
Asset Quality Still in Control
Federal Bank face risks when people don’t repay their loans. These bad loans are called Non-Performing Assets (NPAs). Federal Bank has managed to keep these under control.
Gross NPA stood at ₹4669.66 crore, which is 1.91% of total loans
Net NPA was ₹1157.64 crore, or 0.48% of net loans
These numbers show that most of the bank’s loans are being repaid on time.
The bank also reported a Provision Coverage Ratio (how much of the bad loans are covered by provisions) of 74.41%, which means they are well-prepared to handle future risks.
CEO’s Statement
Federal Bank’s Managing Director and CEO, KVS Manian, said the bank has shown strong business performance. He also mentioned that the bank saw high fee income and stable asset quality. He explained that the higher credit costs were mainly due to issues in the agriculture and microfinance loans. But he expects these problems to reduce in the coming months.
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