AU Small Finance Bank shares rose nearly 5% in Monday's intra-day trade following the lender's strong Q1FY27 earnings announcement. The stock climbed 4.9% to a high of ₹1,051.45 on the BSE, with trading at ₹1,042.60, up 4.03% as of 9:51 AM, significantly outperforming the benchmark BSE Sensex which was at 76,681 with a 0.82% rise. The bank's market capitalisation stood at ₹78,075.54 crore during the trading session.
AU SFB reported a 37% year-on-year rise in net profit at ₹796 crore for Q1FY27, compared with ₹581 crore in the year-ago period, aided by robust growth in net interest income and lower provisions. According to latest reports from Business Standard, net interest income increased 32% Y-o-Y to ₹2,696 crore from ₹2,045 crore, while operating profit increased 9.4% to ₹1,435 crore from ₹1,312 crore. However, sequentially, net profit declined 4% and NIM contracted 7 basis points due to reversal of certain one-off gains recorded in the March quarter. Net interest margin expanded by 47 basis points to 5.9%, reflecting effective yield management despite a 60 bps decline in cost of funds to 6.48%. Total income rose 19% Y-o-Y to ₹3,385 crore, underscoring the bank's ability to sustain profitability amidst geopolitical uncertainties and tighter liquidity conditions.
The bank's gross loan portfolio stood at ₹1.44 trillion, up 23% Y-o-Y, with secured businesses growing 25% and unsecured businesses expanding 11%. As reported by Business Standard, slippages declined 22% Y-o-Y to ₹798 crore from ₹1,027 crore in Q1FY26, led by improvement in the unsecured loan portfolio. Provisions fell 30% Y-o-Y to ₹371 crore from ₹533 crore, though they increased sequentially from ₹269 crore in the March quarter. Asset quality showed mixed trends with gross NPAs improving to 2.10% from 2.47% Y-o-Y but edging up marginally to 2.03% quarter-on-quarter. Net NPAs improved to 0.76% from 0.88% Y-o-Y but rose marginally from 0.74% QoQ. The capital adequacy ratio remained robust at 18.9% with Tier I capital at 17.1%. According to ICICI Securities, the bank maintained a gross slippage ratio at 2% while keeping credit cost at ~1% even during a seasonally slow quarter, with continued improvement in MFI and unsecured loan portfolios.
Total deposits rose 24% Y-o-Y and 3% sequentially to ₹1.58 trillion, with current account savings account (CASA) deposits growing 22% Y-o-Y and 5% quarter-on-quarter. According to Business Standard, the CASA ratio stood at 29% during the quarter. Disbursements increased 42% over the year, indicating strong business momentum across the bank's operations. The credit-deposit ratio stood at 80%, excluding advances created from refinance by Development Finance Institutions. The bank allotted 7,04,837 equity shares during the quarter pursuant to employee stock option exercises.
In a significant leadership move, the Board elevated Yogesh Jain from Chief Operating Officer to Deputy CEO effective July 25, 2026, to strengthen management bandwidth. Additionally, Yogesh Soni was categorized as Senior Management Personnel (SMP), while Bhaskar Karkera, Vaman Ramesh Kamat, Vivek Rathi, Dhavan Natvarlal Shah, and Ankur Tripathi were re-categorized from SMP to non-SMP. The record date for determining members eligible for the final dividend is Friday, July 31, 2026. The Board approved the unaudited financial results on July 25, 2026, under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with joint statutory auditors M S K A & Associates LLP and Mukund M. Chitale & Co. issuing an unmodified limited review report.
Nomura has maintained its Neutral rating on AU Small Finance Bank while raising its target price to ₹980 from ₹975 after the lender reported steady Q1FY27 performance. According to Nomura, the bank reported core pre-provision operating profit (core-PPOP) at ₹13.5 billion, up 4% quarter-on-quarter and 6% above its estimate, driven by robust net interest income growth and lower-than-expected operating expenses. Lower treasury income resulted in a PPOP of ₹14 billion (2% above est), with PAT of ₹8 billion (+37% y-y, 4% above our est). The brokerage noted that adjusted net interest margin (NIM) rose 5 basis points quarter-on-quarter in the first quarter after adjusting for one-off items in the previous quarter. Nomura expects the bank to deliver loan and deposit CAGR of 23% each over FY26-28, with the bank maintaining its return on assets (RoA) guidance of 1.8% for FY27 despite expected pressure on margins from higher cost of deposits. The brokerage raised its FY27 and FY28 earnings per share estimates by 3% each, citing lower credit costs and operating expenses, while maintaining its cautious stance on valuation at an unchanged multiple of 2.6x March 2028 estimated book value per share.
