01 — At a Glance
The Kerala Bank That PE Money Just Started Chasing
- 52-Week High / Low₹302 / ₹176
- CMP₹286
- Q3 FY26 PAT₹1,041.21 Cr
- FY25 Full-Year EPS₹16.93
- Annualised EPS (Q3×4)₹17.76
- Book Value₹147
- Price to Book1.95x
- Dividend Yield0.42%
- NPA Ratio (Gross)1.72%
- Deposits Growth (YoY)+11.8%
Auditor’s Opening Note: Federal Bank closed Q3 FY26 with ₹1,041 crore PAT (up 9% QoQ, up 15.9% YoY), highest-ever NII at ₹2,652.73 crore, and a CASA ratio that just hit 32%. Meanwhile, Blackstone got regulatory nod to acquire up to 9.99%, and the bank just raised ₹6,196 crore through warrants. Stock up 50% in a year. The Kerala banking remake is no longer a prequel.
02 — Introduction
The Least Sexy Turnaround Story in Indian Banking Right Now
Federal Bank. Incorporated 1931. Second-largest bank in Kerala. The kind of bank your grandfather trusted with fixed deposits. NRI remittances are basically their superpower — Kerala’s got 29% of deposits coming from non-residents living in Middle East. That’s not a product differentiator. That’s an economic moat disguised as geography.
For a decade, this was a sleepy regional bank compounding at mid-teens returns. Nobody on TV screamed about it. No hedge fund bought call options on it. It just sat in portfolios, paid 0.42% dividend yield, and returned 27% over five years while everyone chased AI stocks.
But something changed in the last twelve months. A new CEO took over. Management started talking about “mid-yield” lending like it was fashion. CASA balances expanded faster than anyone expected. And then — December 2025 — Blackstone basically knocked on the door with a term sheet: “We want in. We’re buying warrants worth ₹6,196 crore, and we’re expecting to own 9.99% of this thing by Q4 FY26.”
Q3 results came out. Record NII. Record operating profit. ROA improvements. Margins expanding. The bank literally hand-delivered proof that turning boring into better-yielding assets actually works. And the markets responded — up 50% in a year. Analysts started paying attention. Now here we are.
Concall Note (Jan 2026): “Highest ever NII, highest ever operating profit” — when a bank says this, they’re usually trying to distract from something. Nope. This was just execution.
03 — Business Model: They Lend. Boring. Genius.
Retail Mortgage ≠ Retail Lending. And Federal Just Figured Out the Mix.
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