Federal Bank's Q1 net down 15% on high slippages in agri, MFI segments

Sequentially, the profit was down 16 per cent from Rs 1,030 crore to Rs 862 crore

Federal Bank on Saturday reported a net profit of Rs 862 crore, down 15 per cent year-on-year (Y-o-Y), in the April-June quarter of FY26 (Q1FY26), driven by higher provisions because of elevated slippages from the agriculture and microfinance segments.

 

In Q1FY25, the bank’s net profit stood at Rs 1,010 crore. Sequentially, the profit was down 16 per cent from Rs 1,030 crore. 

 

Net interest income, the difference between interest earned and interest expended, grew by a mere 2 per cent to Rs 2,337 crore during the quarter, while non-interest income was up 22 per cent to Rs 1,113 crore.

 

Net interest margin (NIM), a measure of profitability of banks, for Federal Bank in Q1FY26 stood at 2.94 per cent ,as compared to 3.16 per cent in Q1FY25, and 3.12 per cent in Q4FY25.

 

“We follow a T+1 repricing process on the repo linked advances, which means a large part of the rate cut which has happened has been factored in our numbers. We expect NIM to bottom out in Q2 and improve thereafter as cost of funds drops and loan mix rebalances”, said Venkatraman Venkateswaran, CFO, Federal Bank. 

 

Provisions of the bank increased 41 per cent Y-o-Y in Q1FY26 to Rs 695 crore from Rs 491 crore last year. It increased 60 per cent sequentially from Rs 435 crore in Q4FY25.

 

Gross slippages for the bank in Q1FY26 increased to Rs 658 crore crore as opposed to Rs 417 crore in Q1FY25. Out of the fresh slippages, Rs 273 crore was from retail, Rs 270 crore is agriculture assets.

 

“While credit costs were elevated in Q1, they were largely driven by slippages in the agri and microfinance portfolio. Based on the current trends, we expect the slippages to moderate and stabilise going forward, leading to a normalisation in credit cost,” said Venkateswaran,CFO, Federal Bank.

 

The asset quality of the lender weakened with gross non-performing assets ratio (GNPA) at 1.91 per cent as of June 30, 2025, compared to 1.84 per cent as of March 31, 2025. The net NPA ratio stood at 0.48 per cent as of June 30, 2025, as against 0.44 per cent as of March 31, 2025.

 

The bank reported a net advances growth of 9 per cent (Y-o-Y), led by focused growth in medium yield segments to Rs 2.41 trillion, while deposits grew by 8 per cent to Rs 2.87 trillion.

 

“We are on track to grow at 1.2 times the nominal GDP,” said Venkateswaran, CFO, Federal Bank.