Federal bank Limited has successfully completed the allotment of equity shares under its Employee Stock Option Schemes, marking another milestone in its employee participation programs. The bank allotted a total of 2,05,701 equity shares on January 26, 2026, following proper regulatory procedures and committee approvals.

Allotment Details

The share allotment was executed under two distinct Employee Stock Option Schemes, with the Nomination, Remuneration, Ethics and Compensation Committee providing the necessary approvals. The allotment occurred after the option grantees completed their payment obligations.

Scheme-wise Breakdown

ESOS 2010 Scheme

Under the ESOS 2010 Scheme, the bank allotted 750 equity shares to option grantees. These shares, with a face value of Rs. 2/- each, were issued following the exercise of stock options by eligible employees.

ESOS 2017 Scheme

The majority of the allotment comprised 2,04,951 equity shares under the ESOS 2017 Scheme. This substantial allocation demonstrates the continued participation of employees in the bank's newer stock option program.

Regulatory Compliance

The bank has formally notified both the National Stock Exchange of India Limited and BSE Limited about the share allotment. Company Secretary Samir P Rajdev signed the regulatory communication, ensuring compliance with stock exchange requirements and maintaining transparency in corporate actions.

The allotment represents the bank's ongoing commitment to employee ownership participation through structured stock option schemes, providing employees with opportunities to benefit from the institution's growth and performance.

Federal Bank delivered a strong performance in Q3FY26, with profit after tax rising 9% both year-on-year and quarter-on-quarter to ₹10.40 billion. The results exceeded analyst expectations by 7%, demonstrating the bank's robust operational efficiency and strategic execution.

Financial Performance Highlights

The bank's financial metrics showed consistent improvement across key parameters during Q3FY26:

Margin Expansion and Cost Management

Net interest margins expanded significantly by 12 basis points quarter-on-quarter to 3.18%, surpassing Motilal Oswal's estimate of a 3 basis points decline. This improvement was primarily driven by effective cost of funds management, with costs reducing by 11 basis points quarter-on-quarter. The margin expansion, combined with healthy loan growth in medium and high-yield segments, contributed to the bank's strong net interest income performance, which grew 9.10% year-on-year and 6.30% quarter-on-quarter, beating estimates by 5%.

Growth Momentum Across Segments

Federal Bank's advances growth of 10.90% year-on-year and 4.50% quarter-on-quarter exceeded both analyst and market expectations. The growth was characterized by broad-based expansion across most segments, with retail being the only exception. This diversified growth strategy helped the bank maintain a balanced portfolio while capturing opportunities in higher-yielding segments.

Deposit Performance and CASA Improvement

The bank's deposit base grew 11.80% year-on-year and 3.10% quarter-on-quarter, providing a stable funding foundation. Particularly noteworthy was the CASA (Current Account Savings Account) performance, which registered impressive growth of 18.90% year-on-year and 6.60% quarter-on-quarter. This strong CASA growth led to an improvement in the CASA ratio to 32.10%, compared to 31% in Q2FY26.

Analyst Outlook and Recommendations

Based on the strong Q3FY26 performance, Motilal Oswal has revised its profit after tax estimates upward by approximately 2.50% for FY26 and 2.30% for FY27. The revision factors in the sustained net interest margin expansion and healthy loan growth trajectory. The brokerage estimates Federal Bank to deliver FY27E return on assets of 1.26% and return on equity of 12.20%. Motilal Oswal has reiterated its BUY rating with a target price of ₹310, representing 1.7 times September 2027 estimated adjusted book value.