Debasis Mohapatra
Bengaluru, 30 April 2026
Private sector lender, Federal Bank is expected to report better earnings in coming quarters on the back of better liability mix, and improving fee income.
Brokerage firm, ICICI Direct said in a report that the private lender’s shift towards loan products in commercial banking, LAP (loan against property) and gold loan is going to support its yield improvement.
“Bank’s earnings trajectory is improving with adjusted RoA (return on asset) at around 1.24% (versus 1.15% QoQ), driven by a combination of better liability mix (CASA up 87 bps QoQ), steady fee income traction (fee-to-asset at about 1%) and stable credit cost (around 47 bps),” ICICI Direct said in a note.
The management of the bank expects gradual improvement in return, which will be led by scaling up of fee business like cards, trade and wealth.
“Management expects FY27 growth to improve as chosen segments scale, while corporate lending strategy remains disciplined and selective, with emphasis on mid-corporates, better pricing and cross-sell opportunities,” the report said.
In terms of business growth, advances grew 13% in fourth quarter of last fiscal year led by commercial banking, gold loans, and CV/CE (commercial vehicle & construction equipment).
CASA ratio improved 87 basis points sequentially to 32.9% by the end of March quarter. “Management remains confident of achieving about 36% CASA ratio over time,” the report said.
Federal Bank has reduced its low-yield book by around 250 bps YoY, while mid-yield segments have increased proportionately, indicating steady progress, the report noted.
“Deposit growth remained qualitatively strong, with conscious reduction in wholesale deposits and higher share of CASA and retail term deposits, improving funding profile,” it said.
For the Kerala-headquartered bank, remittance inflows and NRI deposits remain robust, with no immediate concerns amid Middle East conflict.
