Detailed Narrative
Q3 FY26 Performance Overview
Fedbank Financial Services reported a strong Q3 FY26 with business AUM reaching INR17,500 crores, a 17% Y-o-Y growth (32% ex-BL). Net interest income grew 16.8% Y-o-Y to INR318.9 crores, contributing to a net profit of INR87.9 crores for the quarter. The company maintained its credit cost at 0.9% and saw its ROE expand to 12.7% over the last four quarters.
Gold Loan Business Momentum
The gold business recorded a remarkable quarter with AUM growing 52% Y-o-Y to INR7,905 crores, and tonnage growing 5.1% Y-o-Y, reaching 11.2 tons. Disbursals in Q3 FY26 were INR7,853 crores, the highest ever in a single quarter, leading to a net AUM growth of INR1,174 crores. The company opened 54 new gold branches, bringing the total to 113 for the year, with AUM per branch reaching INR13.3 crores.
LAP Business and Portfolio Mix
Mortgage AUM grew 20% Y-o-Y to INR9,084 crores. The MT LAP business disbursed INR545 crores in Q3, while the ST LAP division disbursed INR208 crores. The unsecured lending portfolio has been reduced to under 0.6% of on-book assets, down from 10% at the beginning of the fiscal, making 99.4% of the loan book fully secured.
Asset Quality and Collections
Delinquencies (1+) improved from 7.5% to 7.1%, and (30+) from 4.6% to 4.5%. However, Gross Stage III increased to 2.1% from 1.9% last quarter due to higher forward flows from Stage 2. The company has strengthened its collection infrastructure, verticalizing the framework and adding resources for call center, legal, and recovery teams. Credit cost for Q3 remained flat at 0.9%.
Funding and Cost of Borrowing
The weighted average interest cost of total borrowings decreased by 32 bps from 8.19% to 7.87% Q-o-Q, facilitated by resets on external benchmark-linked borrowings and lower rates on new borrowings. Fixed rate borrowings increased from 11% to 29% of total borrowings to lock in spreads, while floating rate borrowings constitute 71% (41% external benchmark, 30% MCLR). The incremental cost of borrowing in Q3 FY26 was below 7.6%.
Operational Efficiency and Investments
Opex increased by 21 bps primarily due to higher employee costs from new branch staffing, gold loan origination incentives, and a one-time📎 labor code impact of INR3.9 crores. This led to a slight increase in cost-to-income by about 10 bps. Management stated FY26 is an investment year, with costs expected to reflect in FY27.
Yield Management and DA Income Strategy
Management clarified that reported yields are affected by DA income, which was consciously reduced to INR1 crore for 9M FY26 from INR62 crores in the prior year. They emphasized that core yields remained stable, and the focus is on core income growth. The company is transitioning from direct assignment to co-lending, which will involve accounting changes.