Federal Bank Share Price: Q2 FY27 Results, Profit, NII and Asset Quality Explained
Federal Bank reported a record net profit of ₹1,386 crore for the July–September 2026 quarter (Q2 FY27), up 45.1% from a year earlier, while net interest income rose 26% to ₹3,153 crore and net NPAs fell to 0.17%, according to the bank's investor presentation summarised by Investing.com. The Federal Bank share price closed at ₹338 on NSE on October 16, up 0.9%.
The headline number is striking, but the more useful question for investors is where the growth came from. Was it a one-off, or did the core lending business genuinely get stronger? Here's what the data shows.
Key Takeaways
- Net profit: ₹1,386 crore, up 45.1% YoY and 17.8% QoQ.
- Net interest income (NII): ₹3,153 crore, up 26% YoY; net interest margin (NIM) at 3.32%.
- Gross NPA fell to 1.32% from 1.83%; net NPA fell to 0.17% from 0.48%.
- Deposits grew 19% to ₹3.43 lakh crore; average CASA deposits crossed ₹1 lakh crore.
- GoPocket analysis: about ₹14,922 crore of deposits came from a special FCNR window, which management flagged as a source of NIM volatility.
What Did Federal Bank Report for Q2 FY27?
Federal Bank's Q2 FY27 profit of ₹1,386 crore is the highest quarterly profit in its history. A year earlier, in Q2 FY26, the Kochi-based lender had reported ₹955.26 crore, Business Standard reported in October 2025. That low base matters: Q2 FY26 profit had actually declined from the year before, so part of this year's jump is a recovery rather than pure acceleration.
| Metric | Q2 FY27 | Q2 FY26 | Change |
|---|---|---|---|
| Net profit | ₹1,386 crore | ₹955 crore | +45.1% |
| Net interest income | ₹3,153 crore | ₹2,495 crore | +26% |
| Net interest margin | 3.32% | 3.06% | +26 bps |
| Fee income | ₹1,168 crore | ₹885 crore | +32% |
| Operating profit | ₹2,225 crore | ₹1,644 crore | +35% |
| Gross NPA | 1.32% | 1.83% | −51 bps |
| Net NPA | 0.17% | 0.48% | −31 bps |
| Capital adequacy (CRAR) | 16.84% | 15.71% | +113 bps |
Sources: Q2 FY27 figures from the bank's presentation as reported by Investing.com (October 16, 2026); Q2 FY26 comparatives from Business Standard (October 20, 2025). Standalone bank figures.
Where Did the Profit Growth Come From?
The growth came from three places at once: higher interest income, much stronger fee income and lower credit costs. That combination is what separates this quarter from a typical "good quarter".
- Interest income: NII rose 26%. Net customer assets grew 22% to ₹2.98 lakh crore, and cost of deposits fell to 5.21% from 5.61% a year earlier, faster than the fall in loan yields (8.70% from 8.99%).
- Fees: Fee income hit a record ₹1,168 crore. Insurance distribution income rose 35% YoY to ₹146 crore, and loan processing fees climbed 31% sequentially to ₹246 crore.
- Credit costs: Credit cost fell to 31 basis points from 50 basis points. Fresh slippages (loans newly turning bad) dropped to ₹420 crore from ₹579 crore.
Treasury income of ₹238 crore also helped. Management itself noted this line can be volatile from quarter to quarter, so investors shouldn't treat it as recurring.
GoPocket Analysis: How Much of the Margin Gain Is Durable?
Federal Bank raised about ₹14,922 crore through a special FCNR window during the quarter, and management said in the earnings call that FCNR-related activity created some volatility in NIM. FCNR(B) deposits are foreign-currency deposits from non-resident Indians; the RBI ran a swap window in mid-2026 that made these deposits cheaper for banks to raise. You can read how that scheme worked in our explainer on FCNR(B) deposits.
Here's a simple way to size it. Total deposits were ₹3.43 lakh crore. The FCNR window money of ₹14,922 crore is about 4.4% of that (₹14,922 ÷ ₹3,43,000 crore). It's meaningful but not dominant. Management also said roughly 18% loan growth is sustainable excluding FCNR leverage, which signals that the bank itself separates the window-driven balance sheet growth from its core run-rate.
Our read: the asset-quality improvement and fee growth look more structural than the margin gain. Asset quality is at what the bank calls decadal-best levels, with a provision coverage ratio of 86.78%. The margin, by contrast, depends on deposit costs, rate cycles and the FCNR book, all of which can move.
How Did the Federal Bank Share Price React?
The stock closed at ₹338 on October 16, 2026, up 0.9% from ₹335, after trading between ₹328 and ₹344.80 during the day, according to NSE closing data. A muted move after a record quarter usually means the market had already priced in much of the improvement.
| Price point (NSE) | Value | Date |
|---|---|---|
| Close | ₹338.00 | Oct 16, 2026 |
| 52-week high | ₹371.70 | Aug 3, 2026 |
| 52-week low | ₹216.02 | Oct 20, 2025 |
| Distance from 52-week high | −9.1% | GoPocket calculation |
| Gain from 52-week low | +56.5% | GoPocket calculation |
The stock has already re-rated sharply over 12 months. That context matters: strong results on a stock that has risen 56% from its low face a higher bar than strong results on a stock near its lows.
What Did Management Guide For?
Management kept its medium-term targets unchanged. As reported, the bank expects:
- Loan growth in the mid-teens, with around 18% seen as sustainable excluding FCNR leverage.
- An average NIM improvement of 5–6 basis points per quarter, though not in a straight line.
- Return on assets (ROA) to improve by 3–4 basis points per quarter on average. ROA was 1.32% in Q2 FY27 versus 1.09% a year earlier.
- A cost-to-income ratio around 52%; it was 52.08% this quarter.
These are company targets, not certainties. Banking margins are sensitive to RBI rate decisions; the RBI raised the repo rate earlier this year, which we covered in our RBI policy analysis.
What Are the Risks?
- Margin volatility: FCNR deposits and rate changes can swing NIM.
- Agriculture and microfinance: Management said it remains cautious on these segments given inflation, weather and geopolitical uncertainty.
- Bancassurance rules: Draft regulations on insurance distribution could hit fee income if finalised in their current form, management said.
- Treasury dependence: Treasury gains of ₹238 crore may not repeat.
- Deposit competition: Banks are competing hard for deposits, which can push costs back up.
How Does Federal Bank Compare With Peers?
Federal Bank's net NPA of 0.17% is now among the lowest in Indian private banking. Investors comparing mid-sized private lenders can track City Union Bank, South Indian Bank, CSB Bank and RBL Bank on GoPocket. Larger peers such as HDFC Bank, ICICI Bank and Axis Bank report Q2 results over the coming days, which will give a clearer sector comparison.
What Should Investors Watch Next?
- Whether NIM holds above 3.3% in Q3 FY27 as FCNR deposits settle.
- Fee income trends if bancassurance rules change.
- Slippages in agriculture and microfinance books.
- Progress on management's ROA improvement target.
Sources
- Investing.com, Federal Bank Q2 FY27 slides: record profit, decadal-low NPAs, October 16, 2026
- Business Standard, Federal Bank vaults after Q2 PAT rises 11% QoQ, October 20, 2025
- NSE bhavcopy data for FEDERALBNK, October 16, 2026
Disclaimer: This article is for information and educational purposes only. It is not a recommendation to buy, sell or hold any security. Past performance does not guarantee future returns. Please consult a SEBI-registered investment adviser before investing.
