AU Small Finance Bank Reports Q1 FY26 Results: Strong Deposit & Secure Loan Growth, Revises Credit Cost Outlook
This announcement provides the bank's latest quarterly financial performance, including key metrics like PAT, ROA, NIM, deposit and loan growth, and asset quality. It also includes revised guidance on credit costs and future outlook from management, which are critical for investor evaluation and can significantly influence market perception and share price.
The bank reported strong growth in deposits and secure loan segments, which is positive. However, this is offset by a significant decline in Net Interest Margin (NIM), elevated credit costs in unsecured and specific secure (Southern mortgages) segments, and an upward revision of the full-year credit cost guidance. Management expresses confidence for H2 recovery and future ROA targets, balancing the near-term challenges.
AU Small Finance Bank Limited announced its financial results for the Quarter ended June 30, 2025: * Financial Performance: Profit After Tax (PAT) grew by 16% year-on-year to ₹581 crore. Return on Assets (ROA) was 1.5%. Net Interest Margin (NIM) declined by 38 basis points (bps) quarter-on-quarter to 5.4% due to reduced asset yield, lower investment yield, and higher liquidity. The bank expects Q2 FY26 to be the bottom for NIM, with gradual improvements from Q3 onwards, assuming no further rate cuts. * Deposits: The deposit base crossed ₹1,27,000 crore, growing by 31% year-on-year, nearly 3 times the system growth rate. Current Account (CA) balances grew by 34% year-on-year, and Savings Account (SA) balances grew by 13% year-on-year, leading to a total CASA growth of 16% year-on-year. Cost of funds improved by 6 bps to 7.08%. The bank undertook pricing cuts on SA and FD rates in line with the easing rate cycle. * Loan Book: The loan portfolio grew by 18% year-on-year to ₹1,17,000 crore. * Secure Segments (88% of loan book): Grew by 22% year-on-year. * Retail Secured Assets (67% of loan book): Grew by 20% year-on-year to ₹79,000 crore. * Wheels: Loan portfolio grew by 26% year-on-year to ₹38,000 crore. Distribution expanded significantly. Credit cost remains broadly in line with expectations. * Mortgages (Micro Business Loans & Home Loans): Grew by 14% year-on-year to ₹39,000 crore. Noted stress in the Southern book (15% of total mortgage book), primarily due to inherent customer profile and transition of the team post-merger, but measures are taken to strengthen collection and enforcement infrastructure. * Gold Loans: Grew by 11% year-on-year to ₹2,000 crore. Distribution network increased from 350 to 850 branches post-merger. * Commercial Banking (21% of loan book): Grew by 30% year-on-year. Asset quality remains in line with expectations. * Unsecured Segments (8% of loan book): De-grew by 23% year-on-year. * Inclusive Finance (MFI): The book de-grew by 22% year-on-year to ₹6,200 crore. Collection efficiency dropped to 98.3%. The bank expects the book to have bottomed out in Q1, stabilize in Q2, and grow thereafter, targeting ₹7,000 crore by year-end. Incrementally, 97% of Q1 disbursements are covered under the CGFMU credit guarantee scheme. * Credit Card & Personal Loans: The credit card book de-grew by 27% year-on-year to ₹2,300 crore. Credit cost remains elevated but may have peaked in Q1 in absolute terms, expected to normalize from H2 onwards. * Credit Costs: Overall credit cost remained elevated in Q1, driven primarily by unsecured segments and the Southern mortgages portfolio. The bank increased its full-year credit cost expectation by 10-15 bps, taking the expected credit cost to around 1% of average total assets from the previous 85-90 bps guidance. * Management Commentary: Mr. Sanjay Agarwal, MD & CEO, stated that while Q2 NIM might decline, Q3 and Q4 NIM are expected to expand. He emphasized that the bank is on track for stability and scalability, expecting an upward trend in ROA compared to last year and reiterating the 1.8% ROA guidance for FY27. Mr. Vivek Tripathi, Chief Credit Officer, highlighted that the stress in used SCV/HCV is a very small proportion of the book and that measures have been taken to improve collection infrastructure for the Southern mortgage book.
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AU Small Finance Bank Limited filed this with the NSE as a statutory disclosure, categorised under results. It is a primary document, not a recommendation, and the desk marks it high impact, which is the band that most often changes something.
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