Provisions lead to a 9.5% drop in Federal Bank's net profit, even as the operating income rises

MUMBAI: Federal Bank reported a record rise in operational income for the quarter ended Sept 2025, but higher provisions led to a decline in net profit.The bank’s net profit fell 9.5% year-on-year to Rs 955.3 crore from Rs 1,057 crore in the same quarter last year.

Total provisions, including tax, rose 35.4% to Rs 689 crore from Rs 509 crore.

The lender said the higher provisioning reflected a cautious approach to risk management, with credit cost at 50 basis points for the quarter.Operating profit rose 5% to Rs 1,644.2 crore, supported by strong growth in interest and fee income. Net interest income touched a record Rs 2,495 crore, while fee income rose to Rs 886 crore. Other income grew 12.3% to Rs 1,082.2 crore, driven by a 69% jump in insurance distribution income, 41% growth in forex and derivatives income, and a 146% increase in other non-fee income.

Total income rose 3.8% to Rs 7,824.3 crore.Asset quality improved during the quarter. The gross NPA ratio fell 26 basis points to 1.83%, and net NPA eased 9 basis points to 0.48%. The provision coverage ratio stood at 73.5%, and the capital adequacy ratio improved to 15.7% from 15.2% a year ago.Deposits rose 7.4% year-on-year, while advances grew 6.2%. The CASA ratio improved 94 basis points to 31%.Managing director and CEO KVS Manian said the bank had strengthened its foundation through strategic reorientation and by increasing the share of mid-yield assets, which helped drive 25% growth in the commercial book.

However, the home loan portfolio, which accounts for 51.5% of gross advances, fell 1% sequentially to Rs 36,120 crore. The overall retail book contracted 0.4% quarter-on-quarter.Manian said the bank continued to invest in its digital platforms, with 92.6% of all retail and corporate transactions conducted digitally. The lender recently introduced OS-native biometric authentication for UPI at the Global FinTech Festival.