Federal Bank expects its capital to risk-weighted assets ratio (CRAR) to improve by around 50 basis points if the first tranche of capital following Blackstone’s investment is received in the fourth quarter, with the remaining capital infusion slated only for FY28, MD and CEO KVS Manian said on January 16.
Speaking at the post-Q3 results press conference, Manian said Blackstone’s participation reflects long-term investor confidence in the lender’s strategy, responding to a query on the rationale behind the capital raise.
Blackstone is set to invest about Rs 6,196 crore (approximately $705 million) in the private bank through a preferential issue of convertible warrants, which on full conversion will give it up to a 9.99 percent stake in the Kerala-based lender.
“Our strategy requires long-term investor conviction, and we found Blackstone willing to make a long-term bet on the bank. It is a strong and credible name to have on our cap table. We believe the presence of a large, long-term investor boosts confidence among other investors and can help re-rate both the bank and the stock,” he said.
Responding to another query by Moneycontrol on the market speculation around Federal Bank being among the bidders for select Deutsche Bank India retail and wealth portfolios, Manian said it continues to evaluate inorganic opportunities but has no immediate transactions under consideration.
“From time to time, we look at opportunities that are accretive to us and to shareholders. At present, we do not have any opportunities under evaluation,” the management said, responding to queries on Deutsche Bank-related discussions.
Alongside capital-related developments, the bank cautioned that net interest margins are likely to face pressure in the near term due to the impact of the latest repo rate cut.
“There will be pressure following the last repo rate cut announcement. We have already seen the impact of this in Q3, and it will fully play out in Q4. We will do our best to manage the impact,” Executive Director V Venkatraman said.
The lender also addressed concerns around the declining share of retail loans, noting that this reflects a conscious shift in the asset mix towards middle-yielding segments.
“For over a year now, we have been clear that our asset mix is shifting towards middle-yielding assets, and this transition is progressing as planned. Growth is not limited to the commercial banking segment alone—commercial vehicles, gold loans and several other medium-yielding asset classes are also expanding,” it said.
Federal Bank on January 16 reported a 9 percent year-on-year rise in net profit at Rs 1,041 crore for Q3FY26 as against a net profit of Rs 955 crore in the year-ago period, driven by healthy loan growth and stable margins. Consequently, the Kerala-based lender's shares rose 10% to hit a record high of Rs 271.5 apiece.
Net interest income (NII) increased 9 percent year on year to Rs 2,653 crore, compared with Rs 2,431 crore a year ago.
The bank’s net interest margin (NIM) improved to 3.18 percent in Q3 FY26 from 3.11 percent in Q3 FY25.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
