Credit Rating

Secretarial Department SEC/LODR/222/2026-27 22.09.2026 To National Stock Exchange of India Limited BSE Limited 5th Floor, Exchange Plaza Phiroze Jeejeebhoy Towers Bandra (East) Dalal Street, Mumbai – 400001 Mumbai – 400051 Ref.: Scrip Symbol: FEDERALBNK/Scrip Code: 500469 Sub: Intimation regarding affirmation of Credit Rating Dear Sir/Madam, Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that India Ratings and Research has affirmed The Federal Bank Limited's (FBL) debt instruments as follows: Instrument Date of Coupon Maturity Size of Issue Rating Assigned Rating along Description Issuance Rate Date (INR Million) Action with Outlook/Watch Basel Ill Tier 2 - - - 17,000 IND AA+/Stable Affirmed debt Infrastructure - - - 15,000 IND AA+/Stable Affirmed bond Detailed press-release of the aforesaid affirmation of Credit Rating is enclosed herewith. Kindly take the above information on record. Thank you. Yours faithfully, For The Federal Bank Limited Samir P Rajdev Company Secretary Federal Bank | 6th Floor, Federal Towers, Bank Junction, Aluva | Kerala | 683101 Phone: 0484- 2622263| E-mail: secretarial@federalbank.co.in | Website: www.federal.bank.in CIN: L65191KL1931PLC000368 India Ratings Affirms The Federal Bank’s Debt Instruments at ‘IND AA+’/Stable Sep 21, 2026 | The Federal Bank Limited | Private Sector Bank India Ratings and Research (Ind-Ra) has affirmed The Federal Bank Limited’s (FBL) debt instruments as follows: Details of Instruments Size of Rating Regulator of Date of Coupon Maturity Rating Instrument Type Issue (INR Assigned with Instrument Issuance Rate Date Action million) Outlook/Watch Infrastructure Refer ISIN IND - - - 15,000 Affirmed bond* annexure AA+/Stable Basel III Tier 2 Refer ISIN IND - - - 17,000 Affirmed debt* annexure AA+/Stable *refer ISIN details in annexure Analytical Approach Ind-Ra continues to take a standalone view of FBL to arrive at the ratings. Detailed Rationale of the Rating Action The rating reflects the continued strengthening of FBL’s franchise, supported by the expansion of its product profile across profitable segments, broadening diversification of its loan portfolio beyond Kerala, and improving granularity of its liability profile driving profitability. The bank has maintained calibrated business growth and healthy asset quality indicators, emphasising the effectiveness of its internal controls and governance framework. The rating is constrained by the return ratios remaining lower than the higher-rated peers, along with diversification and scaling across high-yielding products; this is a key monitorable. List of Key Rating Drivers Strengths Sizeable franchise with reducing concentration in home state Experienced management team Stable and adequately provided asset quality Adequate capital buffers Funding profile’s increasing granularity Weaknesses Lower profitability than higher-rated peers Detailed Description of Key Rating Drivers Sizeable Franchise with Reducing Concentration in Home State: FBL continues to have a large presence in South India with a significant asset and liability franchise. The bank is diversifying beyond Kerala, where its share of the overall advances declined to 27.7% in 1QFY27 (FY25: 30.7%), while the share of Tamil Nadu and Karnataka rose to 15.1% (14.4%) and 9.9% (9.7%), respectively. The bank’s loan portfolio was INR2,775 billion in 1QFY27 (of which 52.7% originated in Kerala, Tamil Nadu, and Karnataka), with a deposit base of INR3,201 billion (Kerala: 58.8%). Moreover, the bank is taking incremental efforts to expand its share in Maharashtra, whose advance share increased to 22% in 1QFY27 (FY25: 20.7%), with deposits at 12% (13.9%). Furthermore, the bank has a well-diversified advances portfolio across segments, comprising corporates (1QFY27: 35.8%; FY26: 35.6%; FY25: 35.9%), small and medium-sized enterprises (SMEs: 18.2%; 18.1%; 16.8%), retail (31%; 31.6%;31.8%), and agriculture (16%; 16.1%; 15.9%). The retail loan book grew 8.4% yoy in 1QFY27, against the overall gross loan growth of 10.9% yoy, largely due to a cautious stance in the business banking segment (up 3.9% yoy), although commercial banking grew 22.4% yoy. The gold loan book grew 32.7% yoy to INR414 billion in 1QFY27, accounting for 14.9% of the overall gross loan book. The gold loan portfolio provides a granular and collateral-backed growth segment, supporting loan yields while containing loss severity. Experienced Management Team: The bank has seen change in strategy after the Reserve Bank of India (RBI) approved KVS Manian’s appointment as the managing director and chief executive officer for three years starting September 2024. The management team has established itself across the retail and mid-corporate lending segment, improving the bank’s overall fee income. The bank has established a second-layer team under each business vertical head to adapt to any transition at the senior level. As part of its strategy, the management continues to focus on retailisation of the loan book with controlled risk underwriting, digitisation to improve branch-level productivity, and increasing the wallet share with customers. The management stated that the unsecured lending would be capped at 10% of the overall assets under management (AUM), which could be achieved over the next two financial years. Under large corporates, the bank aims to lend to higher-rated entities with reasonable yields while focusing on driving growth through the mid-corporate segment in the medium to long term. Stable and Adequately Provided Asset Quality: The bank’s gross non-performing assets (NPAs) slightly decreased to 1.52% in 1QFY27 (FY26: 1.62%; FY25: 1.84%), largely due to reduced slippages in the overall book; the bank reported credit costs of 67bp in 1QFY27, lower than the industry average. The bank’s slippages ratio was manageable at 0.6% in 1QFY27 (1QFY26: 1.13%). FBL’s provision coverage ratio (excluding technical write-off) was 88.2% in 1QFY27 (FY26: 87.8%; FY25: 76.2%; FY24: 72.3%), leading to a net NPA of 0.18% (0.2%; 0.44%; 0.60%). The low net NPA ratio, high provision coverage, and declining stressed-asset stock provide meaningful protection against incremental credit costs. In terms of transitioning to the expected credit loss model, as per the management, the overall one-time provision would be around 2% of the net worth; however, the bank is yet to decide whether to recognise the impact upfront or spread it over five years. In the absence of any large, stressed exposure, FBL’s credit costs are likely to be stable in the medium term. The concentration risk, measured by the top 20 group exposures as a percentage of its total advances, was largely stable at 9% in 1QFY27 (FY25: 7.6%). FBL’s total stressed book (net NPAs + standard restructured assets + net security receipts) was 0.5% of the loan book as of 1QFY27 (FY26: 0.61%; FY25: 1.05%; FY24: 1.57%), and the net stressed asset/net worth was 3.8% (4.2%; 7.4%; 11.3%). Ind-Ra expects the impaired book to stabilise in the medium term, along with incremental loan growth in better-rated borrowers and increased focus on retail growth. Adequate Capital Buffers: FBL’s capitalisation (1QFY27 Tier 1 ratio: 15.9%; FY26: 13.9%; FY25: 15%) is adequate, and the improved internal accruals and potential receipt of the balance warrant consideration provide additional headroom to support medium-term growth. The bank also has a material stake in its subsidiaries, which can be liquidated during stress. According to Ind-Ra’s stress test, FBL is likely to maintain a common equity tier-1 (CET1) ratio above the regulatory minimum and system average, and the management has guided that it will maintain the floor threshold of CET1 ratio at 12%. The capital needs would be catered by the existing warrant amount getting called until August 2027, supporting medium-term growth expectation. Funding Profile’s Increasing Granularity: FBL [Showing first 8,000 characters — download PDF for full document]