AU Small Finance Bank delivered impressive Q4FY26 results that exceeded market expectations, with profit after tax surging 65% year-on-year and 25% sequentially to ₹832 crore. According to reports from CNBC TV18, the bank's full-year FY26 PAT grew 25% to ₹2,641 crore, demonstrating consistent growth momentum. The strong performance was driven by net interest income rising 23% year-on-year to ₹2,582 crore, supported by loan growth and margin expansion. Net interest margins improved to 5.96%, up 24 basis points sequentially, aided by lower cost of funds and improved asset mix.
The bank's asset quality metrics demonstrated significant improvement during the quarter. As reported by CNBC TV18, gross NPAs declined to 2.03% and net NPAs to 0.74%, indicating better risk management. Slippages fell 17% quarter-on-quarter to ₹659 crore, showing improving collection efficiency. Credit costs declined sharply to 0.6% in Q4, while FY26 credit cost stood at 1.0%, reflecting normalized asset quality trends. The bank's return on assets reached 1.8% and return on equity at 17.0% for the quarter.
According to Motilal Oswal's analysis reported by CNBC TV18, growth momentum remains among the strongest in the industry, driven by a high-yielding asset mix and steady business traction. The brokerage expects operating expenses to moderate, with the cost-to-income ratio likely to decline to 56-57% over FY27-28E. Deposits grew 23% year-on-year and 10% sequentially to ₹1.52 lakh crore, supporting the bank's expansion. With stable margins, normalizing credit costs and sustained growth, Motilal Oswal expects the bank to deliver best-in-class earnings growth over the medium term.
Motilal Oswal has reiterated its 'buy' rating with a price target of ₹1,275, implying a potential upside of 22% from current levels of ₹1,040.50. As reported by CNBC TV18, the brokerage expects a PAT CAGR of 35% over FY27-28. The bank continues to be a top pick among mid-sized private lenders for Motilal Oswal, which remains constructive on the bank's underlying growth trajectory. Despite the strong quarterly results, shares ended 2.36% lower on Monday at ₹1,040.50, though the stock has gained over 23% in the past month.
