AU Small Finance Bank reported a 53% surge in net profit to ₹858 crore for the second quarter ended September 30, 2026, compared to ₹561 crore in the corresponding period of the previous year. According to The Economic Times, this significant profit growth was driven by strong loan and deposit growth across the bank's operations. The basic earnings per share increased to ₹11.44 from ₹7.52 in Q2FY26, reflecting a 52.1% YoY growth in profitability. The bank achieved annualised Return on Assets (RoA) of 1.7% and Return on Equity (RoE) of 16.1% for Q2 FY27, compared to 1.4% and 12.4% respectively in Q2 FY26.
Total income increased to ₹6,382 crore in the quarter under review from ₹5,224 crore in the same period a year ago, as reported by The Hindu BusinessLine. Interest income rose to ₹5,612 crore compared to ₹4,511 crore in the corresponding second quarter of the previous year. Net interest income improved to ₹2,820 crore in the July-September quarter, registering a growth of 32% from ₹2,144 crore in the September quarter of 2025. The bank's net interest margin (NIM) expanded by 33 basis points YoY to 5.8%, while the core profit before provisioning and operating expenses (PPoP), excluding treasury gains, grew 31% YoY to ₹1,480 crore. Operating expenses increased to ₹2,077 crore from ₹1,647 crore, reflecting continued investment in infrastructure and personnel as the bank scales its operations.
The bank demonstrated robust business growth with gross loan portfolio reaching ₹1.54 lakh crore, reflecting a 25% YoY growth against an estimated sectoral growth of around 19%. Disbursements grew 33% YoY and 12% quarter-on-quarter, demonstrating breadth across various business sectors. Retail and commercial segments of secured businesses grew by 26% YoY, while the unsecured business saw a 23% YoY expansion. Deposits also witnessed robust growth, increasing by 28.6% YoY to approximately ₹1.70 lakh crore, surpassing the banking sector's estimated growth rate of 18%. Current account and savings account (CASA) deposits climbed 29% YoY, boosting the CASA ratio by 72 basis points to 29.5% sequentially. The cost of funds saw a reduction of 43 basis points YoY to 6.41%. As per The Economic Times, the bank is in the process of transforming itself into a universal lender, with pre-provision operating profit growing around 28% year-on-year at ₹1,514 crore for the second quarter over ₹1,210 crore a year ago.
The bank's asset quality showed marked improvement during the quarter. Gross non-performing assets (NPAs) decreased to 1.99% of gross advances at the end of September 2026, compared to 2.41% a year ago, according to The Hindu BusinessLine. Net NPAs or bad loans also moderated to 0.81%, as against 0.88% in the year-ago period. Slippages decreased to 2.6% from 3.3% in Q2'FY26, and the credit cost, including guarantee premium, improved by 45 basis points YoY to 0.8%. Gross NPA ratio improved by 42 basis points sequentially from 2.10% to 1.99%, indicating stabilization in overall gross non-performing assets, while Net NPA ratio increased by 5 basis points sequentially from 0.76% to 0.81%, reflecting slight adjustments in provisioning coverage. Net provisions fell 25% year-on-year to ₹359 crore against ₹481 crore in the previous year, indicating better provisioning management during the quarter.
ICRA upgraded the bank's long-term credit rating outlook to Positive from Stable, while reaffirming the long-term rating at AA. Despite strong operational performance, the Capital Adequacy Ratio decreased to 18.54% from 18.78% at the end of September 2025, as reported by The Hindu BusinessLine. This decline in capital adequacy ratio represents a slight weakening in the bank's capital position despite the robust profit growth and improved asset quality metrics. Net provisions fell 25% year-on-year to ₹359 crore, indicating better provisioning management during the quarter.
AU Small Finance Bank MD & CEO Sanjay Agarwal commented on the quarter's performance, stating that it reflects the institution's steady building of growth with profitability and ambition with prudence. According to The Hindu BusinessLine, Agarwal emphasized that the balanced growth of the franchise, improving profitability and stable asset quality reinforce confidence that the foundations for sustained, long-term performance are firmly in place. As per The Economic Times, the bank, which is in the process of transforming itself into a universal lender, has been founded in 1996 as a vehicle financier and is now India's largest small finance bank.
