AU Small Finance Bank reported a 65% jump in net profit for Q4 at ₹832 crore compared with ₹504 crore in the year ago period. According to reports from The Economic Times, the strong profit growth was primarily aided by sharply lower provisions, which declined 58% year-on-year to ₹269 crore. The bank's net profit for FY26 was up 25% at ₹2,641 crore, demonstrating consistent performance improvement throughout the fiscal year. However, despite these strong financial results, AU Small Finance Bank's stock price closed down 2.13% on Monday, April 27, 2026, while the broader NSE Nifty 50 index gained 0.81%, indicating investor concerns about future growth prospects.
While profit growth was robust, operating performance showed more modest expansion. As reported by The Economic Times, the bank's operating profit for the quarter rose a modest 5% at ₹1,352 crore against ₹1,292 crore earlier, due to rise in operating expenses including employee costs. However, the bank achieved significant margin expansion with net interest margin (NIM) for the quarter expanding by 24 basis points to 5.96% from the preceding three-month period. Net interest income grew by 23% year-on-year at ₹2,582 crore, while other income stood 4% lower at ₹731 crore due to ₹17 crore treasury loss. The bank's cost of funds declined 12 basis points quarter-on-quarter to 6.49% in Q4FY26, contributing to improved profitability.
The bank demonstrated robust business growth across key metrics. According to The Economic Times, gross loan portfolio grew by 21% year-on-year to ₹1.40 crore, while total deposits grew by 23% to ₹1.53 lakh crore. The asset quality showed marked improvement with gross non-performing assets ratio declining sequentially to 2.03% at the end of March from 2.30% three months prior. Net NPA ratio was at 0.74% compared with 0.88% for the same time period, indicating enhanced credit quality management. Current account deposits grew 34% year-on-year to ₹9,359 crore, while savings account deposits increased 16% year-on-year to ₹33,998 crore. The CASA deposits grew 20% year-on-year to ₹43,357 crore, with the CASA ratio standing at 28% as of March 31, 2026.
The strong quarterly performance reflects AU Small Finance Bank's continued operational improvements and risk management effectiveness. However, the negative stock reaction suggests investors are focused on the bank's future prospects rather than current financials. Concerns may center on the sustainability of profit growth, potential margin compression from competition for deposits and tighter liquidity, and the provisioning reduction. The recent appointment of Gaurav Jain as Chief Financial Officer brings new leadership with extensive global experience, which could signal future strategic shifts. The bank also declared a ₹1 dividend as part of its shareholder returns. Credit cost for FY26 was 0.96% of average total assets, improved from 1.30% for FY25, indicating enhanced asset quality management.
