Federal Bank denies merger talks with any other bank

However, the bank has also told the exchanges, "We wish to clarify categorically that the news report of a merger between Federal Bank and another private bank is speculative in nature."

When asked what the considerations would be if Federal Bank has to buy something, he replied, “We would look for opportunities that may be margin accretive. We like businesses with high margins. If there is a scalable microfinance opportunity, absolutely yes, we will be interested.”

Analyst note that though Kotak has always been on the prowl for acquisition, at its own price, nothing has changed in the last six months to catalyze the acquisition of Federal Bank by Kotak Bank.

Bank stocks have been the best performers lately with half a dozen banks stocks hitting all-time highs on Thursday. Banks are also seeing a bunch of upgrades to their earnings due to higher than estimated margins, lower than feared credit costs, higher loan growth expectations etc.

Srinivasan expects the loan growth to be better in the coming quarters and the margins to grow in the near term.

“We may see an uptick in margins in a quarter or two. In the business mix, the credit quality and the cost of liabilities will be defining how the margins are and we have been guiding for something like 3.25-3.27 percent for the full year and I am sure that we should be able to deliver on that,” he said.

The industry credit data suggests it is the best in 7-8 years. “I have been around for a long time, I have never seen credit growth of this nature in the first 120 days of a financial year,” he said.