Federal Bank (FB) announced a robust fourth‑quarter performance, with core profit on the books surpassing market expectations by 9.9% and 13.5% respectively. The improvement was largely driven by a stronger net interest income and a higher net interest margin.
The bank’s net interest margin (NIM) climbed to 3.33%, an increase of 13 basis points from the previous quarter and 39 basis points from a year ago. This rise was supported by four key factors: an uptick in mid‑yielding loans by 200 basis points year‑on‑year, a 190‑basis‑point rise in average CASA balances, solid quarter‑on‑quarter growth in personal loans and credit cards, and effective use of surplus liquidity.
Return on assets (RoA) is expected to improve gradually, with guidance of an additional 3–4 basis points each quarter. The bank’s management is on track with its strategic plan, marking the fourth consecutive quarter of positive surprises.
Based on these results, analysts have increased their forecast for FY27/28 NIM by 12 basis points, which translates to an average 5.0% lift in core profit after tax. They also raised the target price to INR 345 by applying a higher earnings multiple of 1.6x from the current 1.5x, while maintaining an ‘ACCUMULATE’ recommendation.
Overall, Federal Bank’s strong financial metrics and clear execution of strategy give investors confidence in its future performance.