Federal Bank shares touch 14-week low today: What's the reason?
What's the story
Federal Bank's shares plummeted 6% in today's intraday trade, hitting a 14-week low of ₹185 per share. The fall came after the bank's June-quarter earnings missed market expectations. The poor performance was mainly due to a sharp increase in provisions, high credit costs, and increased slippages. However, the stock has since recovered from its intraday lows and is now trading at ₹195 with a marginal decline of 0.20%.
Financial details
Slippages worsen
Federal Bank's slippages increased to ₹648 crore from ₹490 crore in Q4 FY25, largely due to increased stress in the microfinance institution (MFI) segment. The bank's gross non-performing assets (GNPA) and net non-performing assets (NNPA) ratios also marginally worsened to 1.91% and 0.48%, respectively, against 1.84% and 0.44% in the previous quarter. Provisions surged by 177% year-on-year to ₹400 crore with credit costs rising sharply as well due to higher MFI slippages.
Management insights
Month-on-month decline in MFI slippages
Federal Bank's management noted that MFI slippages peaked in May 2025 but have been declining month-on-month since then. They also said the special mention account (SMA) pool and collection efficiency in the MFI book have improved, indicating a possible recovery from this situation. The bank has guided for credit costs of 55 basis points for FY26. Despite these challenges, Axis Securities retained its 'Buy' rating on the stock with a target price of ₹240 per share.
Profit report
NIMs fall sharply, net profit down 14% YoY
Federal Bank's net interest margins (NIMs) fell sharply by 18 basis points due to a decline in yields and interest reversals. The bank reported a net profit of ₹862 crore, which is down 14.6% YoY and 16.4% QoQ, while its net interest income (NII) grew by 1.96% YoY from ₹2,291.98 crore to ₹2,336.83 crore for the June quarter.