Ladies and gentlemen, good day and welcome to the Q4 FY 2026 Conference Call hosted by Federal Bank. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Souvik Roy, Head, Investor Relations, The Federal Bank Limited. Thank you, and over to you, sir.
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, 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 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.
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 that 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 improving the quality and 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 CASA, is clearly showing results. As a result of this approach, we have consciously reduced our reliance on high-value deposits, which has contributed to a more stable and cost-efficient funding base. At the same time, we continue to build on our traditional strengths. Our NRI franchise remains a key differentiator, and we have further strengthened our leadership position in this segment. NRI deposits have now crossed INR 1 lakh crore, alongside a continued increase in market share, reinforcing the strength and resilience of this franchise.
On the asset side, we remain committed to a calibrated shift in our portfolio mix. This is inherently a medium-term journey, and we are encouraged by the traction seen across most of our identified focus segments. 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. Our fee income trajectory during the year has been extremely encouraging, reflecting improved cross-sell, better product penetration, and a more diversified revenue profiles. Profitability metrics have also shown resilience. Our ROA has now reverted back to the pre-rate cut levels, supported by improved margins and disciplined cost management. During the quarter, we also launched our Wealth Management business.
This is an important step in building a stronger mass affluent franchise, as well as deepening customer engagement, enhancing our fee pool, and building a more comprehensive financial services proposition for our clients. In parallel, we have taken a more scientific and data-driven approach to our physical network strategy. Our branch expansion and restructuring initiatives are now guided by detailed studies undertaken by us, along with reputed experts in the domain. This is helping us build a more efficient, well-distributed, and a future-ready branch network. In line with our recent brand refresh, our branches have begun transitioning to a renewed and refreshed outlook. The project on reimagining our branch operating model is also making very good progress. As we look ahead, our focus remains unchanged, consistent execution, disciplined growth, and continued strengthening of the franchise.
With that, I will hand it over to Venkat to take you through the numbers in more detail.
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 at the bank and wishing you all the very best, Mani.
Thank you, sir.
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. 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%. This is a trend which we have to monitor going into Q1 FY 2027.
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 escalated late in the quarter, February 28 onwards, and introduced volatility into global energy markets. The full inflationary pass-through is expected to reflect in from Q1, from later part of Q1 FY 2027. That said, India's macro fundamentals remain on strong footing. The operating environment, while carrying new uncertainties into FY 2027, remains fundamentally sound. Our focus on high quality credit and balance sheet discipline has kept us well buffered against external uncertainty. The deliberate shift in our portfolio towards secured and granular assets over the past few years has positioned us well. Now, coming to the performance for the final quarter.
It was a quarter of robust execution. 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. You would have seen in the deck, we have called out some one-off gains and the impact of that. We delivered INR 1,145 crore in net profit, representing nearly 10% sequential growth. This is the highest ever quarterly net profit for the bank. The performance was driven by healthy NII, fee income, and disciplined cost management and tight monitoring of our asset quality. As we have emphasized before, these outcomes are the result of deliberate shift in our balance sheet towards a more granular and durable profile.
The total business assets 31st March stood at INR 578,959 crore, growing at 4.63% QoQ and nearly 12% YoY. Our liability franchise remains the bedrock of our stability. CASA balances crossed the INR 100,000 crore mark to close at INR 103,390 crore, growing 8.26% sequentially and nearly 21% YoY. Our NRE deposit, which is our moat, reached a significant milestone, crossing the INR 100,000 crore mark to close at INR 102,620 crore. This represents a robust 13.2% YoY increase, underscoring the deepening trust and strong engagement. Our CASA ratio improved to 32.94%, an increase of 87 basis points QoQ and 271 basis points YoY. This is amongst one of the best in the industry.
The steady improvement in our funding mix is materially enhancing our durability with the cost of deposits declining 5 basis points QOQ to 5.43%. On advances, our gross advances closed at INR 268,369 crore, up 3.65% sequentially and nearly 13% YoY. Growth continues to be led by the segments we have consciously prioritized for superior risk-adjusted return. Commercial Banking grew nearly 6% QoQ and 26% YoY, maintaining its position as a primary growth engine. Agricultural and Agri and Microfinance both saw healthy traction, growing 5% and 7.28% QoQ respectively. Our CV/CE business saw a sharp uptick of 8.5% sequentially. Our Gold Loan portfolio delivered a robust performance once again, growing 26% YoY and 9% QoQ.
This momentum in Gold Loan growth has been maintained despite the fact that we were downsizing the book of a specific sub-segment to ensure full alignment with the latest regulatory framework. Our LAP portfolio extended by 8% QoQ, reflecting strong underlying demand and our focused approach. We expect this growth trajectory to further accelerate in the coming quarter as we continue to deepen our penetration in this high conviction segment. In the Business Banking, we saw a growth of 6% YoY. This was a conscious decision to prioritize portfolio health and yield protection. While our commitment to the MSME sector remains steadfast, our focus is on calibrated growth. Our corporate and institutional banking book remained essentially flat QoQ, reflecting a deliberate shift towards credit selectivity. Amid global geopolitical noise and evolving trade dynamics, we have prioritized portfolio quality and pricing discipline over headline volume.
With exposures within high-rated counterparties, we are preserving capital and reinforcing the long-term resilience of our wholesale balance sheet. Coming to margins and core income. NIM for the quarter was INR 2,716.66 crore, growing 2.4% QoQ and 14.2% YoY. NIM expanded to 3.20%, up two basis points sequentially. This was supported by a further reduction in funding costs within the overall cost of funds declining four basis points to 5.46%. The other major call-out is on the fee income, which is again a record, best ever. Stood at INR 990.92 crore, a strong growth of 10.5% QoQ and 24% YoY. Total other income reached INR 1,145 crore.
Fee growth remains well distributed and continues to strengthen the quality of earnings. Our Cost-to-Income ratio improved to 52.86%, down 106 basis points sequentially, which reflects the operating leverage within the franchise. During the quarter, we expanded our physical presence by adding 39 new branches, staying consistent with our calibrated and, like Manian mentioned, data-driven approach to network expansion. Our asset quality metrics continue to remain strong with GNPA and NNPA both at decadal best. GNPA declined to 1.62% and NNPA down to 0.37%, down five basis points QoQ, marking another all-time low for the bank. Our provision coverage ratio, excluding technical write-offs, increased to 76.55%, up 141 basis points sequentially. Credit cost for the quarter was maintained at 47 basis points, reflecting our high standards of underwriting and portfolio quality.
As Manian mentioned earlier, both ROA and NIMS have reached our pre-rate cut levels. ROA increased to 1.24%, up nine basis points sequentially. If you recollect Q1, it was 1% ROA, we have ended the year at 1.24%. ROE improved to 12.47%, an expansion of 79 basis points QoQ. To conclude, Q4 reinforces the fact that we are building a more stable margin-led and resilient franchise. Our priorities remain unchanged, strengthening the liability franchise, growing in chosen segments and maintaining a tight grip on credit quality and cost. While global uncertainties, including the situation in West Asia, require us to remain watchful, the granular and secured nature of our balance sheet ensures we are well positioned across cycles.
We move into the new fiscal year with a focus on risk-adjusted profitability and consistency of outcomes. Thank you, and we'll now open up for questions.
Thank you very much. We will now begin the question and answer session. Anyone.
Operator, operator, before we start, just a small request from our end, you know, to all participants. If you can please keep your questions to a maximum of two and refrain from, you know, repeating points that have already been covered. T hat will help us ensure that we can take questions from everyone on the call. Thank you. Please go ahead.
Certainly, sir. Thank you very much. Ladies and gentlemen, if you wish to ask questions you may press star one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Rikin Shah from IIFL Capital. Please go ahead.
Hi, good evening, and thanks for the opportunity.
Hi.
Manian, sir, 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, you know, the balance sheet realignment that you were doing this year, both your loan and deposit growth has been below system in FY 2026. 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 retiral provisions in this quarter. If you could quantify the same so that we can understand the normalized trends. Lastly, just a clarification one.
The one-time provisions of INR 456 crore are included in PCR. Why not in contingent provisions? Why are they, you know, included in the provision coverage? Those are my three questions.
Okay. 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, right? 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 b ecause as you know, the wholesale deposit rates were fairly elevated during, especially during the last quarter and in the last two quarters actually the fact that we could fund our balance sheet with.
Low-cost liabilities and retail term deposit is a measure of strength and not weakness. We think we have also resorted to very low borrowings during the year. We have a lot of gunpowder and free to fund growth going forward. We feel fairly confident on the liabilities. Even on the asset side, again, I would request you to go one level deeper than just looking at the broad headline number. If you take all the media leading areas that we have chosen and we have stated that we want to grow, have all grown extremely handsomely, whether it is Gold at 9% or LAP at 8% or all of them actually. Each of them has grown extremely handsomely.
We feel fairly confident and remain focused on growing these segments because it is important for us to be focused on profitable growth and there is enough opportunity we see in building growth on that business. We think we get increased traction from going from here, not lesser traction. That's about the growth question you asked. The second-
Any futuristic comments for FY 2027, if you can? I mean, my fair points. The points that you clarified are well taken. If you could offer any guidance on FY 2027, that would be helpful on growth.
Rikin, all I would tell you is that we have clearly seen acceleration in all the areas we have chosen, and we'll continue to build this acceleration and it will get better. If you recall, last quarter YoY looked eight, today it is looking 13, right? Obviously, there is traction building up, and we are confident of building traction further from here. Let me leave the guidance at that.
Okay. Sure.
The second question you asked was about the staff cost. We don't want to quantify that because there are provisions that happen through the year and things like that. Those are not easily quantifiable as to what exact impact that has had. All I would say is that this is normal course of business. It happens during cycles. There are gains and negatives. We treat them as BAU. That is on the second. On the third, on the provisions.
Yeah, on the provisions, Rikin.
Yeah.
The conditions remain the same for withdrawal, both floating and CLS is floating standard. Let me make it very clear, we don't have any particular portfolio where we want to provide this for. There's no concern. First thing I want to make it very clear is there is nothing which we have specific to offset this against. Having said that, the fact that it's a one-time gain, we wanted to be conservative and create a buffer. This, we believe we can, as per the draft guidance, we can use it during the ECL transition, which is around the corner.
Got it, sir. Thank you.
Yeah.
Thank you. Our next question comes from the line of Akshay Jain from Autonomous. Please go ahead.
Thank you, sir. Thank you for the opportunity.
Right.
My question is again on growth. How does the war change your outlook on growth? Like, you know, you had indicated that the war led to increased remittances during the early days. Now since things have settled, how is the remittance strength versus historical rates? You know, will it warrant a relook at growth assumptions on both deposit and loan side? That's my first question on growth. Number two on margins. Like, you know, now repo cuts are behind us. How shall we look at margins trending to FY 2027? Is there any further deposit repricing left or, you know, or is it more or less done? That, those are my two questions.
Answering your second one first, Akshay, there is still scope for deposit repricing. As we have earlier also guided that our deposit pricing goes, I mean, the first quarter of this year, as well as maybe early part of the next second quarter as well. There is still some deposit repricing potential that is possible from here where we stand. And of course, 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 mix on term deposits, retail versus wholesale.
It is a mixed story on the asset side, Medium-Yield Assets versus Low-Yield Assets. It is a composite, complex story. It is not a one- trick pony. There are multiple levers we still have, you know, to work on expansion of NIM from here. If you really look at our NIMs of last year versus this year full year, if you just take the last full year NIM versus this full year NIM, you'll notice that we have just lost about two basis points in our NIM over the entire year's basis. That's probably one of the lowest in the sector, right? There are very few banks which have been able to defend their NIM as well as that.
Our NIM story is about multiple levers being pulled, and we are confident that we'll continue to remain agile and build that NIM expansion from here. That is on the NIM part. Your second part was on the remittance and that story. Again, let me just clarify. While our remittance story was good and our NR deposit story was good, and we crossed INR 1 lakh crore deposits of NR, our NR book term and CASA put together has crossed INR 1 lakh crore. The fact remains that our resident SA and resident CA and resident term deposit have grown even faster than our NR growth. It's not that our balance sheet is driven, the growth is being driven by, NR remittances and NR deposits.
Okay.
Our, again, it is a multiple lever story. Just clarifying that. Remittances as of now remain elevated. You know, I don't know how this plays out. It is anybody's guess. My sense is that unless you see significant job losses and returning Indians from UAE for good into India, I don't think this story is likely to change immediately. Of course, whether that happens or not, I can't predict. If that doesn't happen, I think Middle East will be in a rebuild mode, and that will probably need more people to go there and therefore a robustness of the that remittance may continue. I would say early to say anything negative about it. As of now, we are seeing positives in it.
Thank you, sir. Just a follow-up on margins. We know we are seeing that, you know, even larger banks are facing it difficult to pass on the December 25 basis point rate cut. Right? How is Federal placed on this front? Number two, is there any day count impact on NIMs this quarter?
Is there any?
Day count impact.
Yeah. It is, I mean, we just take it in our stride, that's it. It is there, of course, day count impact is there. Just answering your last one first. Before that, going back, you know, of course, we have to compete in the market, and we have to pass on the rate as is required. Obviously, you know, like I mentioned, we have defended our NIM does not mean the defense came only through assets or liabilities, right? Obviously, our asset yields would have dropped and our costs would have dropped and we have maintained the NIM.
A s I said, as long as in the segments that we want to build growth, we continue to find the risk return okay, we are happy to compete.
Grow.
Yeah. Only when we find that the risk- return trade-offs and the ROEs are not good enough is when we are hesitant. Just now we are not seeing that in our chosen areas of growth. Of course, I'll be happy to get some more yields on assets. T hat is another thing we are working on. We are also increasing the discipline on pricing through pricing tools, RAROC-based tools and things like that. All that is of course, part of the execution process which we are which we remain focused.
Okay, sir. Thank you for the answer.
Just to repeat that, both on NIM as well as on ROA, we are back to our pre-rate cut cycle levels.
Levels.
Those were at the peak of the cycle, and what we have now are at the bottom of the cycle. I would like to believe that there is a qualitative difference between the same NIM and ROA between then and now.
Understood. Thank you, sir.
Thank you.
Thanks.
Our next question comes from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, team. Thanks, 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?
No. Piran, no, that is not impacting our current account growth. That is, at some level they are connected, but it is not that they are 100% connected. If both were, 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 BB.
Okay. our target CASA ratio of 36% stays, right?
Why not? Piran, we have moved. As you know, we are close to 33 now, right? 32.94.
Correct.
We are almost 300 basis points up since we started this journey, right? If we can do that in 12 months, why should we not?
18 months.
12 to 12, 15, 18 months we have done that. There's no reason for us not to believe 36 is gettable at some point, yes.
Fair enough. Secondly, just on fee income growth now, last year we've done much better than our peers. One part of it was just rationalizing fees across various products. It will be like a one-time reset, right? Now, from this base, how should we think about the drivers of fee income growth or the drivers of a fee to assets ratio upward going forward?
Right. I n the past also I have said that there are three, of course, apart from general banking fees, which we have reset some of it and we have worked on increasing them, there are three key drivers of fees. One, credit card fees. two, wealth management fees. three, trade and Forex fees. We are seeing some traction in trade and Forex, but we can do more. We believe we can do more. In cards, we are growing fairly at a good clip, and I think we will continue to build that. That journey is just about begun. Wealth, its journey has just not even begun. I mean, I would say we are just a few months into that business.
I think there are enough levers again there for us to continue driving fees.
Got it. Just the last question for Venkat, sir. Now that you've moved on from the CFO role, what functions will you be overseeing?
No, no. He'll oversee the CFO role. CFO will report into him. It's more a separation than.
Yeah
G iving up the role. We have separated the role of CFO from Venkat. Mani will be the CFO, but he will report to Venkat. Since he has now been elevated to the ED level.
Yeah
Functions.
Piran, not to worry. You know, most of the times they're rolling up to me only. I don't have to do.
Understood.
Broadly, as you know, many of the support functions, many of them, apart from CFO, IT Ops, vigilance, there are many of them which roll up into Venkat.
Got it. Got it. Yeah. Okay, that's it from my end. Thank you and wish you all the best. Thank you once again for not discontinuing that Saturday you wanna practice. You've kept up your promise. Thank you for that.
Thank you for that, Piran.
We have taken your feedback seriously so far. Yeah, we fixed the calendar.
Okay. Yes, Operator. Next question, please.
Next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. Thanks for taking the question. Firstly, after this one-time 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 o r maybe transitioning into ECL, we would still continue to maintain like, say, 45, 50 basis points of Credit Cost guidance.
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 extra fee we have taken. Just to clear, Kunal, 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.
Quarter was-
Yeah, 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. Yeah.
We'll keep the guidance there. Especially we don't want to meddle with the guidance just now.
Yeah.
Given view of the uncertainties in the environment just now, we don't want to review our guidance for now. Having said that, if the situation clears and there is better clarity on this Middle East and other geopolitical issues, we will review and let you know. Right now we don't want to change our guidance on that.
Sure. In terms of the exposure linked to Middle East, maybe on the liability side, we know of the proportion which is there on the NR deposits. Looking at our presence out there in South, would there be on the retail side, maybe what percentage of the portfolio could be exposed to Middle East? Could there be any risk out there?
You are talking about the asset side portfolio?
Yeah, on the asset side. Yeah. maybe particularly for maybe the families which are based out of Middle East, and we would have given them the loans over here.
Right. All I can tell you is that it is not a large exposure. NR segment per se is a more liability-centric segment than an asset-centric segment, it's not a large exposure. Like I mentioned a while back, unless we see job losses and you know, people returning back to India kind of a situation, we don't expect trouble. Just having told you that we have gone through this situation post-COVID as well, right? When a lot of disruption on this front we saw. Even then the credit costs were reasonably controlled and stable. As of now, we have no reason to believe that it'll be dramatically higher. It'll have high impact.
Sure. Just one last clarification. Is the entire IT favorable orders have been considered in this quarter? The filings which have been done and the benefit which is flowing in, there is some very deviation out there. Will there be more that will come through in the first quarter, or largely it is accounted for?
No, no. The what we have reported is our close to over INR 1,500 crores of, approximately INR 1,500 crores of, refunds.
Yeah.
Refunds have three parts to that. One impact of that is interest on that refund that we have got, which is the INR 456 crore number that you see in our as a one-off. The second is tax provision reversals, which is an INR 115 crore roughly number you see there.
Okay. Yeah.
That is the second. Third is the balance sheet. Rest of it is a balance sheet item, which is excess tax paid re-refunded back. All the INR 1,500 crore that we have reported earlier have been accounted for in this.
Okay. INR 900, INR 950 is directly into the balance sheet?
Yes, that's right. Roughly.
Okay.
Broadly, like I said, four-
Okay
INR 450, INR 115, in the balance sheet.
Perfect. Yeah, got it. Thanks. That's enough.
That would reduce other assets on the balance sheet. Yeah.
Got it. Yeah. Thanks. That's helpful. Yeah. Thank you.
Thank you. Our next question comes from the line of M.B. Mahesh from Kotak Securities. Please go ahead.
Hi, Mahesh.
Hey, hi. Couple of questions from my side. First, again, continuing on, 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 is guiding continues in that regime as well or is there a reassessment to that number?
No, that we'll have to reassess, Mahesh. That is as things stand today, you know, our past guidance was that. All I said was we are not changing the guidance just now. ECL change in 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 give us how are you thinking about how does ECL change the provisions?
Mahesh, yeah, it's still too early. We are assessing that. Let's come back to you with a proper, studied, response on that rather than a quick response. As you know, this came only two days back. We are still evaluating what the full implications will be. We'll come back to you.
Okay. The second question is that in terms of the given conditions at which we are today, would you delay the riskiness of the profile that you are trying to build today? Will there be some delay to it or you would say that there is nothing required at this stage, we can continue with the current plans that you are having?
Unsecured.
Let's assume that if you're building your LAP book, if you want to build your personal loan book or your credit card book or your MFI book a little bit faster, does these things change today or you say that it's not required right now?
No, no. I think nothing has changed in our plan. I think as of now we have no reason to rethink our plan. Nothing has happened which makes us rethink or reevaluate our plan. We will continue to build that. We'll continue to focus. If you have seen, we have begun in a small way to build the MFI last quarter. I think our plans do not change. Cards we are building, as you have seen, that is unsecured. Nothing changes in our mind just now.
Sir, just one clarification. In your internal policy, till what can you take your Gold loan portfolio to?
See, currently, Mahesh, the Gold loan portfolio is around little less than 14%. We haven't set a any outer limit, but it's well within our risk appetite. We'll take a call. Let's say if it goes closer to 20%, we'll reevaluate at that time and decide whether it's appropriate or not. Nothing like a ceiling at this stage.
Okay. Perfect. Thank you.
Yeah. Thanks.
Thank you. Our next question comes from the line of Jai Mundhra from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Good evening, and thanks for the opportunity. Sir, 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, you know, more than INR 15,000 per gram or maybe INR 16,500 per gram to now INR 1,INR 15,000 or below. Do you calculate the Gold prices on a daily basis or you do some one-month, two-month average or there is a cap at the upper level? How does this work?
I'll ask Arsh to answer that. Yeah, Arsh.
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 two is taken. That's the normal course. In times of extra volatility, we reduce the LTVs also. I mean, we increase, we reduce the LTV also. There are two things we do. Does it answer your question?
Sorry, sir. Yeah.
No. We take the lower of the two, last day as well as average of.
Last 30 days.
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 4th, when we saw increased volatility Gold prices, we had also increased the margin over there so that we protect the portfolio. At this point of time, our gold loan portfolio LTV is below 54%.
Right. No, so that is very helpful. It's clear. Second question is, sir, on cost to income, like we had a guidance that we gave in the strategy day. Does that hold or, you know, I mean, any re-thoughts on that Cost- to-I ncome and guidance? Thank you.
If you see our numbers even this quarter and if you adjust for the one time, we are in the 53-ish range, right?
Right.
We had always guided that we will remain in this range bound, in this 53, 55, 56 kind of range bound we will remain depending on the quarter. It has some seasonality impact as well. Right now we have, again, no reason to change our guidance on that. We will stick with our guidance for now. We have done slightly better than the guidance in the year, I would say we would right now keep the guidance as is.
Sure. Thank you and all the very best.
Thanks.
Thank you. Our next question comes from the line of Param Subramanian from Investec. Please go ahead.
Hi. Good evening. Thanks for taking my question. Congrats on the quarter, sir. Sir, my question is on the slide 17, you're showing your overall retail banking, your retail advances, and that is, you know, the overall retail book is flat YoY. 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 for the last year or so?
Primarily, Param, if you look at one of the retail thing that affects our growth, overall retail growth is the Home Loan business, right? Our LAP is growing, our Gold is growing, our Agri is growing, CV/CE is growing, MFI is growing. The weightage of the Home Loan book is large, which is the largest book, and therefore, that overall drags our growth number down on retail. On Home Loan, I am quite clear that we'll remain agile. If the pricing gets in the more, 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. Just now, the current market price is what, you know, Param, on a lighter note, you know, 15-year Home Loans are getting priced at 7.15%, and deposits are going at higher rates than that.
Yeah. Right? We don't see any sense in pushing the pedal on that. As and when it makes more sense to us, yes, we will look at it.
Perfect, sir.
[In fact, even if you see our] credit card, all the retail segments other than Home Loan as a product, auto probably to some extent. Autos the rate pressures have been high, but more driven by Home Loan. Home loan is something that drags it down.
Yeah, got it, sir. Sir, again, now, on the mix, right? Where are we right now in our journey, sir? I mean, you've made great progress on, say, shifting the mix towards medium yield, as you've called out. Where are we as in any medium-term target? I was just checking the analyst meet presentation that you made in February last year. The classifications I think are slightly different. Any numbers you'd call out in terms of the mix shift. It's low, medium, high, that you're calling out in slide 19.
19. Param, that, that journey is still, as I said in my early discussion also, it is a medium-term journey, right? Because it's a book. Incrementally, we can change the volumes quickly, but the book takes time to do. If you look at our journey in the last, say, one year, March 2025 to March 2026, our low yield book has dropped from 52.2 to 49.8 kind of numbers, right? It's about 2.5% movement. Our mid-yielding segment has moved by, again, similar number, about 2.5%, right? The more interesting part, if you ask me, going forward, in the quarters to come, is also the high-yielding book, right?
Our cards has been consistently growing. MFI, we have begun to grow again. PL, we have begun to grow again. I think there is potential to grow some of that. I think this journey is still we are on in the journey. I don't think we have reached where we want to reach.
Sure, sir. one last question, if I may. on the Corporate book, I mean, what we can see in terms of data, it seems to suggest that the corporate spreads are improving. Is that something that's a growth avenue for next year? Because I'm just trying to understand because, you know, low yielding is still like, you know, 50% of your book, what you're calling out in that slide.
Yeah.
Housing, you're saying, you know, we are still going to be cautious. Is Corporate something that you are more positive on growth going into next year?
Corporate, two things I would tell you. One is, of course, within Corporate, we are also putting more focus on the mid-market rather than very large Corporates, which gives us a yield uptick. That, last year, almost 75% plus of our NTB acquisitions have been more in the mid-market companies rather than the large companies. That is one effort that is going on that will show up on in terms of yield. The second more important thing about Corporate is, you know, unlike retail, in the Corporate it is probably easier to target wallet, revenue wallet, and get a better share of that. And therefore, things like I mentioned Trade Forex and, you know, Current account. If you see our Self-funding ratio has gone up in Corporate.
You know, liability business, our CMS platform has continued to do well. I think there is opportunity in the corporate to look at a customer-level revenue and do better more easily than it is in the retail side, right? In retail side, cross-selling is a more difficult proposition. I would say in corporate, yeah, we don't want to grow corporate at 18% to 20% kind of rates. Early double digits, we are happy to keep growing that. There our focus will be to increase cross-sell, increase profitability rather than just the book. Corporate is less of a book business, right? It is book and-
Yeah.
New business. Yeah.
Perfect. Very useful. Thank you so much, sir. Congrats on the quarter and especially the phenomenal progress on CASA.
Thank you.
Thank you.
Thank you. Our next question comes from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Yeah. Hi. Good evening, everyone, and 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?
Nitin, if you recall in my, 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 had decided that we'll keep the number low in the first half, and 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 new relaunch. We have a new branch layout also in place. Now the design in place.
We have also completed the exercise about studying our network. We have also come to conclusions on what restructuring of existing network we need to do in terms of relocation, restructuring a branch, relocating a branch and things like that. Now we have more comfort and that's why you see in the last quarter alone, we have added over 30 branches.
39.
39 branches.
39 branches in the last quarter. We think we'll continue to be focused. As of now, we plan to launch about 100 branches in the next year. Yes, branches are important in the liability strategy, but remember the part of the restructure exercise and relocation exercise will also improve productivity of the existing network. Our CASA growth is not again just an outcome of new branches that we will put. It is also about how to get more out of existing network and that is an important consideration for us in the.
Right. Got it, sir. Thank you, Manian, sir. Thanks so much.
Thank you.
Thank you. Our next question is from the line of Rohit Ahuja from Lotuslion Ventures. Please go ahead.
Hi. Thanks for opportunity.
Hi.
You've demonstrated strong operating leverage with cost to income falling sharply and ROA improving to around 1.36%. How do you see this going forward? Like, 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?
Rohit, first let me just put a note of caution on that. If you notice our debt 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.
Sure.
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 three at a broad level, as I always say, that there are very three simple things to do. They are not as simple as I. Of course, that was in a lighter vein. Liability cost and therefore mix, and right mix on the liability of liability. Right mix on the asset side, second, and fee growth is third. The fourth potential can be the cost aspect. As I have always guided in our next 12 to 18 months journey, I think we don't want to guide on cost too much. On the other three, we want to continue maintaining that momentum of improvement.
As you can see, we touched 1% ROA three quarters back. We are up to 1.24% just now. Let's see what we can maintain. Of course, this was a exceptional cycle, a rate change cycle. Yes, our objective is to continue the trajectory of expanding both NIM fees to assets as well as ROA, ROE therefore resultant.
Thank you. Our next question is from the line of Anand Dama from Emkay Global. Please go ahead.
Hi. sir, can you help me with like what is the LCR for our quarter?
119.
Okay. You plan to maintain it around these levels or you want to take it up?
Yes, we are comfortable with 115 to 120.
Yeah, range.
Range. Yeah.
Sure. Secondly, I think you talked about the, you know, there are no job losses as yet. You do not see any immediate retail stress. On the MSME and the Business Banking side, do you see some stress customers coming and talking about that they're being stressed at this point of time and some are up for restructuring? What's the ground situation at this point of time? Can you just talk about that?
Anand, based on our current portfolio behavior, we have no reason to report any stress. If you have seen our slippages, they have remained 0.74%, which is low. I mean, it's in very acceptable range that it has been all the time. Even looking at our current SMA 1, 2, we have no reason to believe that there is any stress building up in our portfolio just now. This is all always an evolving situation and I don't know how deep this problem gets. All I would say is I don't have anything to report as on today.
The provision that we have made this, in this current quarter, floating provision, that is more towards ECL than the HCA conflict?
Yes, absolutely. The floating provision has nothing whatsoever to do with asset quality. Our asset quality remains absolutely robust. No deterioration in it. This is primarily as a transition to ECL.
ECL. Sir, what will be the overall ECL impact if you have assessed, if you can talk about that?
We will come back to you on this. We have not yet fully assessed the impact. There are, of course, this is just two days old, final. We will work on that and come back with our number.
Based on the older guidelines like October 2025, what will be the impact?
No, but not a change. Older guideline to new guideline, there is a lot of change, Anand, because I mean, there is a lot of change. From old guideline to the draft, there was a lot of change. I think what has not changed is draft to this outcome, not much has changed. We will assess the full impact and come back.
Sure, sir. That's all for me . Thank you. I understand.
All I can tell you is that our asset quality is reasonable and robust. Whatever impact we'll have, of course it will be an industry-wide impact and therefore we do hope that given our robust asset quality, our impact should be reasonable.
Thank you. Our next question comes from the line of Jayant Kharote from Axis Capital. Please go ahead.
Thank you for the opportunity, and 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 percentage point, you know, YoY 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 to 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?
No, no. Kharote, this LCR, with respect to CASA and all that, I don't know. That is a complex question, 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 an NIM destroyer, right? A higher LCR than required is also an NIM destroyer. It's a conscious call, and we are quite comfortable with 115%, 120%. A s you know, regulatory requirement is 100%. We are quite comfortable operating at.
Okay. So 115%, 120% is your comfort zone, I mean?
Yes. 115%, 120%. Yeah.
Okay. The second question is with regards to your credit card book growth, it is moving quite differently from the industry. You know, 23% YoY. What will be the growth in interest earning assets? Be fair to assume the transactor growth will be much higher at 30% to 35% YoY.
Okay. I'll ask Virat to take that question.
Yeah. In terms of, your assumption is correct. The growth of transactor is pretty robust because bulk of the credit cards, organic credit cards that we issue are given to our existing customers. From that point of view, the transactor percentage is growing. Having said that, the overall interest earning book has also seen some growth and more on the side rather than the revolver side.
This is very helpful, sir. Thank you and all the best with the next year.
Thank you.
Thanks. Thanks, Jayant. Operator, with this, we'll close the call. Thank you all for joining us today. I would like to, you know, again extend our congrats to Manikandan on his appointment as the CFO of the bank, and we wish him nothing but the best going forward. On that note, I think the calls will close. If you have further queries, feel free to reach out to us. We'll be available for further chat. Thank you so much and have a lovely day ahead.
Thank you.
Thank you.
Thank you.
Thank you so much.
Thank you. On behalf of Federal Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.