ESAF Small Finance Bank has achieved a significant financial turnaround in Q3 FY26, posting a net profit of ₹7 crore compared to a loss of ₹211 crore in the same quarter last year and a loss of ₹115.81 crore in Q2 FY26. The bank has now released its comprehensive Q3 FY26 investor presentation detailing business and financial performance for the quarter and nine months ended December 31, 2025. Net Interest Income rose to ₹432 crore, up from ₹372 crore in the previous quarter, while Net Interest Margin improved to 6.5%, driven by better asset mix and lower cost of funds. Pre-provisioning Operating Profit (excluding one-time income) increased sharply to ₹183 crore, registering a 96.77% sequential growth and a 44% year-on-year increase.
The bank's total business stood at ₹44,686 crore as of December 31, 2025, registering a year-on-year growth of 10%. As reported by The Hindu BusinessLine, gross advances grew by 13.1% to ₹20,679 crore, while deposits increased by 7.1% to ₹24,006 crore. Total deposits grew to ₹24,006 crore, up 7% year-on-year, with retail deposits increasing by 8% to ₹22,426 crore, accounting for 93% of total deposits. CASA balances rose to ₹6,030 crore, with the CASA ratio improving to 25.1%. The bank has significantly expanded its physical presence with an extensive network of 24 States and 2 UTs, featuring 8,596 customer touch points, including 788 banking outlets and 720 ATMs. The bank added nearly 2 lakh new customers during the quarter, taking the total customer base to 99.9 lakh.
Secured loan disbursements surged by 149% to ₹10,530 crore during the quarter, with secured assets now constituting 63% of gross advances, up from 45% a year ago. According to K. Paul Thomas, Managing Director & CEO, this validates the bank's strategic focus on building a more resilient portfolio. Gold loans emerged as the key growth driver, with the portfolio expanding to ₹8,669 crore, reflecting 89% year-on-year growth and 16% quarter-on-quarter growth. In line with the bank's calibrated de-risking strategy, the microfinance portfolio declined from ₹10,000 crore in Q3 FY25 to ₹7,583 crore in Q3 FY26, reducing its share of total advances from 55% to 37%. The bank remains on track to achieve its 70% secured portfolio target by March 2027.
Asset quality showed meaningful improvement during the quarter, with gross NPA reducing to 5.6% from 8.5% in the previous quarter and net NPA declining to 2.7% from 3.8%. As reported by The Hindu BusinessLine, this sharp improvement in asset quality and return to profitability validates the bank's strategic shift towards a more secure, granular and sustainable portfolio. The bank made provisions of ₹243 crore towards stressed assets during the quarter. The Capital to Risk-Weighted Assets Ratio (CRAR) remained strong at 22.7%, while the cost of funds stood at 7.3%. Other income (excluding one-time items) also improved by ₹55 crore quarter-on-quarter. The bank's 9M FY26 Profit After Tax was ₹(190) crore, indicating a challenging first half that was offset by the strong Q3 performance.
Despite the strong Q3 performance, ESAF Small Finance Bank's stock has shown mixed signals in recent trading sessions. The bank's market capitalization stands at ₹1,443 crore, which is lower than the median market cap of its peers at ₹2,420 crore. However, the stock has shown resilience with retail investors continuing to buy shares, which is typically a positive sign of market confidence. The bank's financial stability appears to be stronger compared to its immediate competitors, with lower probability of facing bankruptcy or financial crunch. The bank's strategic focus on expanding to new unbanked and underbanked areas, combined with its comprehensive service offerings including ATMs, debit cards, and digital banking solutions, positions it well for continued growth in the competitive small finance banking sector.
