FEDERALBNKBSEQ4 FY'26May 05, 2026

FEDERAL BANK LTD.

8,299words
98turns
12analyst exchanges
7executives
Management on call
Kvs Manian
MD & CEO
Harsh Dugar
EXECUTIVE DIRECTOR
Venkatraman Venkateswaran
EXECUTIVE DIRECTOR & CFO
Lakshmanan V
GROUP PRESIDENT & HEAD, TREASURY
Virat Diwanji
GROUP PRESIDENT & NATIONAL HEAD, CONSUMER BANKING
Manikandan M
HEAD, FINANCIAL REPORTING
Souvik Roy
HEAD, INVESTOR RELATIONS
Key numbers — 40 extracted
INR 1 lakh crore
granularity of deposits with a clear pivot towards retail liabilities. We hit a milestone of over INR 1 lakh crore in CASA. Our sharp focus on CASA and specifically CA is clearly showing results. As a result of t
INR1 lakh crore
have further strengthened our leadership position in this segment. NRI deposits have now crossed INR1 lakh crore, alongside a continued increase in market share, reinforcing the strength and resilience of this
2%
o landscape remained largely resilient with growth momentum strong and inflation within the RBI's 2% to 6% tolerance band. Headline CPI averaged approximately 3.1% for the quarter. The core inflatio
6%
scape remained largely resilient with growth momentum strong and inflation within the RBI's 2% to 6% tolerance band. Headline CPI averaged approximately 3.1% for the quarter. The core inflation narr
3.1%
trong and inflation within the RBI's 2% to 6% tolerance band. Headline CPI averaged approximately 3.1% for the quarter. The core inflation narrative remains constructive and core CPI averaged around 2
2.1%
% for the quarter. The core inflation narrative remains constructive and core CPI averaged around 2.1% for the quarter, reflecting continued supply side efficiency and absence of broad demand side p
3.87%
ressure. Food inflation was contained early in the quarter, but picked up towards March, reaching 3.87% and this is a trend which we have to monitor going into Q1 FY'27. On the policy side, RBI held th
5.25%
rend which we have to monitor going into Q1 FY'27. On the policy side, RBI held the repo rates at 5.25%, following 125 basis points of easing through calendar 2025. The principal macro risk to flag is
125 basis point
e to monitor going into Q1 FY'27. On the policy side, RBI held the repo rates at 5.25%, following 125 basis points of easing through calendar 2025. The principal macro risk to flag is obviously the West Asia con
INR1,145 crore
have seen in the deck, we have called out some one-off gains and the impact of that. We delivered INR1,145 crores in net profit, representing nearly 10% sequential growth. Now this is the highest ever quarterly
10%
off gains and the impact of that. We delivered INR1,145 crores in net profit, representing nearly 10% sequential growth. Now this is the highest ever quarterly net profit for the bank. The performanc
INR5,78,959 crore
sheet towards a more granular and durable profile. The total business as at 31, March stood at INR5,78,959 crores, growing at 4.63% Q-o-Q and nearly 12% Y-o-Y. Our liability franchise remains the bedrock of our
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Guidance — 20 items
Souvik Roy
opening
“We'll share with the opening remarks from our MD and our ED will walk you through the key highlights of the year and with the strategic priorities going forward.”
Souvik Roy
opening
“This will be, of course, followed by a detailed Q&A like we always do.”
KVS Manian
opening
“This is inherently a medium-term journey, and we are encouraged by the traction seen across most of our identified focus segments.”
KVS Manian
opening
“The project on reimagining our branch operating model is also making very good progress.”
Venkatraman V
opening
“Food inflation was contained early in the quarter, but picked up towards March, reaching 3.87% and this is a trend which we have to monitor going into Q1 FY'27.”
Venkatraman V
opening
“Let me call out that the numbers I'm going to spell out are on the underlying performance metrics, which will be detailing our core earnings trajectory, excluding impact of one-off gains.”
Venkatraman V
opening
“We expect this growth trajectory to further accelerate in the coming quarters as we continue to deepen our penetration in this high conviction segment.”
Rikin Shah
qa
“Given the balance sheet realignment that you were doing this year, both your loan and deposit growth has been below system in FY'26.”
KVS Manian
qa
“Therefore, we have a lot of gun powder and free to fund growth going forward.”
Rikin Shah
qa
“Futuristic comments for FY'27, if you can.”
Risks & concerns — 15 flagged
Growth has been broad-based and aligned with our objective of improving risk-adjusted returns in a market where we have seen intense and sometimes irrational rate competition.
— KVS Manian
The core inflation narrative remains constructive and core CPI averaged around 2.1% for the quarter, reflecting continued supply side efficiency and absence of broad demand side pressure.
— Venkatraman V
The principal macro risk to flag is obviously the West Asia conflict, which escalated late in the quarter, 28 February onwards and introduced volatility into global energy markets.
— Venkatraman V
Let me call out that the numbers I'm going to spell out are on the underlying performance metrics, which will be detailing our core earnings trajectory, excluding impact of one-off gains.
— Venkatraman V
You would have seen in the deck, we have called out some one-off gains and the impact of that.
— Venkatraman V
We have consciously prioritized for superior risk-adjusted returns.
— Venkatraman V
We move into the new fiscal year with a focus on risk-adjusted profitability and consistency of outcomes.
— Venkatraman V
But let me make it very clear, we don't have any particular portfolio where we want to provide this for or there's no concern.
— Venkatraman V
We are seeing that even larger banks are facing it difficult to pass on the December 25 basis point rate cut.
— Akshay Jain
As I said, as long as in the segments that we want to build growth, we continue to find the risk return okay.
— KVS Manian
Only when we find that the risk return trade- offs and the ROEs are not good enough is when we are hesitant.
— KVS Manian
Looking at our presence out there in South, would there be on the retail side, maybe what percentage of maybe the portfolio could be exposed to Middle East and could there be any risk out there?
— Kunal Shah
One impact of that is interest on that refund that we have got, which is the INR456 crores number that you see in our -- as a one-off.
— KVS Manian
See, currently, Mahesh, the gold loan portfolio is around a little less than 14%, and we haven't set the kind of any outer limit, but its will within our risk appetite, and we will take a call.
— Venkatraman V
If we think our -- if the pricing gets in the range where that risk return trade-off is acceptable to us, we will -- as a product, we don't have anything against it.
— KVS Manian
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Q&A — 12 exchanges
Q
Operator, before we start, just a small request from our end to all participants, if you can keep your questions to a maximum of two, and refrain from repeating points that have already been covered. That will help us ensure that we can take questions from everyone on the call. Thank you.
Management
Q
First of all, compliments on continued traction in your CASA and fee execution for the last few quarters. I had a few questions, but maybe I'll come back later with more questions. I'll restrict myself to two first. Given the balance sheet realignment that you were doing this year, both your loan and deposit growth has been below system in FY'26. Now once this realignment, which seems to be largely done, could you comment on the growth outlook going ahead? That's the first question. Second one is on staff expenses, which declined about 9% sequentially. I'm presuming that is due to lower retira
KVS Manian
Answering your first one, Rikin, if you look at our deposit growth, I think it is important to go below the surface. If you look at the surface, the deposit growth seems lower than the system. If you just go one level down and look at our CASA growth, it is significantly more than the system in terms of growth rate. Even our retail term deposit growth is higher than the system. Actually, we have grown our wholesale deposits negatively during the year. That is a measure of strength rather than weakness is the way we read the situation because as you know, the wholesale deposit rates were fairly
Q
My question is again on growth. How does the war change your outlook on growth? You had indicated that the war led to increase remittances during the early days, but now since things have settled, how is the remittance trend versus historical rates? Will it warrant a relook at growth assumptions on both deposit and loan side? That's my first question on growth. Number on margins now are behind us. How should we look at margins into FY'27? Is there any further deposit repricing left? Or is it more or less done? Those are my two questions.
KVS Manian
Answering your second one first, Akshay, there is still scope for deposit repricing. As we have earlier also guided that our deposit pricing goes into next -- I mean, the first quarter of this year as well as maybe early part of the next -- second quarter as well. There is some -- still some deposit repricing potential that is possible from here where we stand. Of course, but our NIM expansion, as you can see from our numbers, is not only a deposit repricing story, right? It is a mixed story on the liability side on CASA. It is on repricing of deposits. It is on reprice mix on term deposits, r
Q
Congrats on the good set of numbers. Just firstly, sir, as we think about calibrating or we have been calibrating business banking growth, you said because of yields and asset quality, won't that impact our current account growth?
KVS Manian
No. Piran, no, that is not impacting our current account growth. At some level, they are connected, but it is not that they are 100% connected. If both work, yes, I agree that both will feed into each other and will be better. Having said that, we can grow our current account irrespective of what we do on BuB. Our target CASA ratio of 36% stays, right? Why not? Piran, as you know, we are close to 33% now, right, 32.9%. We are almost 300 basis points up since we started this journey, right? If we can do that in 12, 15, 18 months, we have done that. There's no reason for us not to believe 36% is
Q
Firstly, after this onetime provisioning that we had done, does it change our credit cost outlook? Maybe would we require a slightly lower provisioning given that we have already scaled it up or maybe transitioning into ECL, we would still continue to maintain like, say, 45, 50 basis points of credit cost guidance?
KVS Manian
Yes. Our credit cost guidance is not influenced by this action. This action is primarily as a transition into ECL. Primarily, that is the purpose of this -- step we've taken. Just to clear, our credit cost guidance has been 50 to 60 basis points in the past. Of course, we have done better than that in this year. Broadly, we have -- if you take the year, we are about 56 basis points. Maybe last few couple of quarters, it's been between 45 to 50, but we still continue with 50 to 60 basis points of guidance. Guidance there. Especially, we don't want to meddle with the guidance just now. In view o
Q
A couple of questions from my side. First, again, continuing on what Kunal asked also. On the ECL side, just if you could just kind of give us some color on -- does the 50 to 60 basis points of credit cost that you're guiding continues in that regime as well? Or is there a reassessment to that number?
KVS Manian
No, that we have to reassess, Mahesh. As things stand today, our past guidance was that. All I said was we are not changing the guidance just now. ECL, change in the West Asia situation and all that are events which we have not built into that. Just if you were to ignore the Middle Eastern crisis today, if you could just kind of give us how are you thinking about how the ECL change the provisions for you? Mahesh, yes, it's still too early. We are assessing that. Let's come back to you with the proper studied response on that rather than a quick response. As you know, this came only 2 days back
Q
First question on gold loan practices. Gold loan, of course, the prices vary quite a lot, and even in third quarter, they would have varied from more than INR15,000 per gram or maybe INR16,000, INR16,500 per gram to now INR15,000 below. Do you calculate the gold prices on a daily basis or you do some 1 month, 2-month average or there is a cap at the upper level? How does this work?
KVS Manian
I'll ask Harsh to answer that. What we do is the two things which we do. One is we take the last 30 working days average gold price and the previous day's gold price, the lower of the 2 is taken. That's a normal course. In times of extra volatility, we reduce the LTVs also. I mean -- yes, we reduce the LTV also. There are two things either. We take the lower of the two last day as well as average last 30 days as well as last day. We take the lower of the two and apply. Apart from that, depending on volatility, like in March 4, when we saw increased volatility in gold prices, we have also incre
Q
Congrats on the quarter. My question is on the -- in Slide 17, you're showing your overall retail banking, your retail advances, and that is -- the overall retail book is flat Y-o-Y. Now I picked up at the beginning, you mentioned that there is some deposit repricing left, the repo rate cut pressures look like they are behind. Would it be fair to assume that you will now start pushing the pedal on this, which you have not been doing over the last year or so?
KVS Manian
Primarily, Param, if you look at one of the retail thing that affects our growth, overall retail growth is the home loan business. Our LAP is growing, our gold is growing, our agri is growing, CV/CE is growing, MFI is growing. There are majority of -- but the weightage of the home loan book is large, which is the largest book. Therefore, that overall drags our growth number down on retail. On home loan, I'm quite clear that we'll remain agile. If we think our -- if the pricing gets in the range where that risk return trade-off is acceptable to us, we will -- as a product, we don't have anythin
Q
Congrats on a strong quarter. I have one question like is on the branch expansion. We have opened like lower branches this year versus what we opened last couple of years. How critical is branch expansion for us to sustain this liability and the CASA mix growth as that has been one of the key focus area. How do you think about that?
KVS Manian
Nitin, if you recall in our earlier calls, we have discussed that we -- in the first half of the year, we deliberately went slow because we wanted to bring more science into evaluation of our existing network and how we plan our future network, which is an exercise we did. We also wanted to work on rebranding and redesigning our branches going forward. We have decided that we will keep the number low in the first half. As we get comfort with that exercise, we will start building the branch network back. Of course, we finished that exercise and we have -- as you know, we did a brand deal, relau
Q
You have demonstrated strong operating leverage with cost to income falling sharply and ROA improving to around 1.36%. How do you see this going forward? What could be the drivers that could possibly take it above 1.5%? Do you see any execution risk that could prevent that from happening?
KVS Manian
Rohit, first, let me just put a note of caution on that. If you notice our deck, we have with one- offs and without one-offs stated. In fact, in entire commentary that Venkat used, he used the without one-off ratios, right? With one-off, it looks like 1.36%, but without one-off, it is 1.24%. Just for the purpose of clarity, I thought I'll mention that. Having said that, yes, journey is to where you are saying, and that is something that we will continue to work on. That, as I said, again, all the 3 -- at a broad level, as I always say, that there are very 3 simple things to do. They are not as
Q
Can you help me like what is the LCR for quarter?
KVS Manian
119. You plan to maintain it around these levels or you want to take it up? Yes, we are comfortable with 115 to 120 range. Secondly, I think you talked about the -- there are no job losses as yet, and so you do not see any immediate retail stress. But on the MSME and the business banking side, do you see some stress customers coming and talking about that they've been stress at this point of time and to come up for restructuring? What's the ground situation at this point of time? Can you just elaborate that? Anand, based on our current portfolio behavior, we have no reason to report any stress
Q
Congrats on a great set of numbers. The first question is on the LCR disclosures. I see it's fallen below 120%. This is now almost like a 20%-point Y-o-Y decline, and it's been steadily moving down. What is your internal Board level threshold and what is your comfort level to operate at? The context of this question is as we are accelerating on growth, the ask from our CASA growth will probably move beyond 20% next year if this LCR lever is not to the same quantum?
KVS Manian
Kharote, this LCR with respect to CASA and all that, I don't know. That is a complex question, so I will not get into that. All I would say is we are currently operating at about 120% roughly. We are comfortable operating at 115% to 120%. In fact, we have consciously brought it down from earlier levels of 135%, 140% that we used to maintain earlier. That is also a NIM destroyer, right? Higher LCR than required is also a NIM destroyer. It's a conscious call, and we are quite comfortable with 115%, 120%. As you know, regulatory requirement is 100%. We are quite comfortable. 115-120 is your comfo
Speaking time
KVS Manian
35
Moderator
14
Venkatraman V
6
Kunal Shah
6
Anand Dama
6
Piran Engineer
5
M.B. Mahesh
4
Param Subramanian
4
Souvik Roy
3
Rikin Shah
2
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Opening remarks
Souvik Roy
Thank you so much. Good evening, and a very warm welcome to everyone on the call. Thank you for taking time to join us today and for your continued engagement with the bank. We definitely value these interactions and look forward to sharing our annual performance as well and along with, of course, our outlook for the year. We'll share with the opening remarks from our MD and our ED will walk you through the key highlights of the year and with the strategic priorities going forward. This will be, of course, followed by a detailed Q&A like we always do. With that, over to you, sir.
KVS Manian
Thank you, Souvik. Good afternoon, everyone. Before Venkat takes you through the detailed financial performance for the quarter, I would like to share a few reflections as we close out the last year. This marks my first full financial year as MD and CEO of the bank. Over the past 18 months period, our efforts have been directed towards sharpening execution, strengthening our core, and aligning the organization firmly with our long-term strategic priorities that we had shared in the analyst meet last year. Our Q4 performance reflects a strong operational quarter with outcomes that are consistent with the direction we have articulated throughout the year. The progress we are seeing is not incidental. It is a result of deliberate actions taken across both sides of the balance sheet. We have had a record quarter on several metrics, details of which Venkat will cover later. On the liabilities front, we have undertaken a calibrated restructuring of our deposit profile. Our focus has been on
Venkatraman V
Thank you, Manian, and good evening to all of you. Before I give my comments, let me start by congratulating my colleague, Manikandan, for becoming the CFO of the bank, and I welcome him to this key position in the bank and wishing you all the very best Mani.
Venkatraman V
Thank you all for joining us today. I trust you have had a chance to review our investor presentation and disclosures. I will focus on the key financial and balance sheet developments from the final quarter, but before that, a few comments on the macro environment. The Q4 macro landscape remained largely resilient with growth momentum strong and inflation within the RBI's 2% to 6% tolerance band. Headline CPI averaged approximately 3.1% for the quarter. The core inflation narrative remains constructive and core CPI averaged around 2.1% for the quarter, reflecting continued supply side efficiency and absence of broad demand side pressure. Food inflation was contained early in the quarter, but picked up towards March, reaching 3.87% and this is a trend which we have to monitor going into Q1 FY'27. On the policy side, RBI held the repo rates at 5.25%, following 125 basis points of easing through calendar 2025. The principal macro risk to flag is obviously the West Asia conflict, which esc
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