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Southern Banks Outshine Market Slump
19 Oct
Summary
- Federal Bank, Karur Vysya, Tamilnad Mercantile Bank meet criteria.
- These banks show strong profit growth and clean balance sheets.
- Rising deposits and NRI funding boost these southern banks.
In a challenging market where Bank Nifty declined approximately 7.7% in the first nine months of 2026, three private sector banks from South India are posting significant gains. Federal Bank, Karur Vysya Bank, and Tamilnad Mercantile Bank have met stringent criteria including over 25% YoY profit growth, low gross NPAs below 2%, and strong deposit mobilization.
Federal Bank reported a 36.5% YoY net profit rise in Q1FY27 and 45.1% in Q2FY27, driven by its robust NRI deposit franchise and a special FCNR deposit scheme. This has improved its CASA ratio and lowered funding costs, supporting net interest margin growth.
Karur Vysya Bank achieved a 37.3% YoY net profit increase in Q2FY27, with retail, agriculture, and MSME lending as key drivers. Despite a slight increase in NPAs, its loan book remains clean, though net interest margins are expected to moderate.
Tamilnad Mercantile Bank also recorded strong growth, with Q1FY27 net profit up 35% YoY. While advances grew significantly, its high dependence on gold loans is being addressed through diversification into MSME and retail lending.
