Federal Bank (FB IN) – Q3FY26 Result Update – Balance sheet management supporting NI004D – BUY
Published on 17 Jan 2026
FB saw a strong quarter yet again due to 4.2% beat on NII as reported NIM rose by 12bps QoQ to 3.18% (7-quarter high) despite repo cut in Dec’25. Increase in NIM was organic in nature driven by (1) fall in higher cost liabilities (2) reducing share of interest-bearing liabilities (3) better investment yield and (4) CRR cut. Driven by positive surprise, liability repricing and superior balance sheet mix, we raise NIM by 5bps each for FY27/28E. Asset calibration is progressing well; CoB/BuB/gold saw good growth in Q3FY26; while corporate accretion was healthy it was not NIM dilutive as focus is on mid-corporates. We are watchful of opex and transition to ECL. We raise core PAT for FY27/2E by avg. 4.0%. Due to increase in core RoA for FY28E to 1.2% we raise multiple to 1.4x while rolling forward to Mar’28 ABV; raise TP to Rs275 from Rs250. Retain ‘BUY’.
