AU Small Finance Bank Limited has informed the Exchange about Transcript
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AU Small Finance Bank filed the transcript of its Q1 FY26 earnings call held on July 19, 2025. The bank reported a 16% year-on-year rise in profit after tax to INR 581 crores and an ROA of 1.5%, but net interest margin fell sharply by 38 basis points to 5.4% from 5.8% in the previous quarter due to repo rate cuts and lower investment yields. Deposit growth remained strong at 31% YoY and loans grew 18% YoY, but the unsecured book (microfinance and credit cards) shrank 23% YoY, dragging credit costs higher. Management raised full-year credit cost guidance to about 1% of average total assets (from 85-90 bps earlier) and said Q2 would be the bottom for NIM, with gradual improvement from Q3 onwards. The bank reiterated its FY27 ROA target of 1.8%, while growth in vehicle finance (26% YoY), commercial banking (30% YoY), and planned branch expansion (70-80 new deposit branches) support the medium-term outlook.
Higher credit costs and NIM pressure in Q1-Q2 may weigh on near-term earnings, but strong deposit growth, a sub-60% cost-to-income target, and the reiterated FY27 ROA guidance of 1.8% suggest the medium-term story remains intact. Investors should monitor NIM stabilization in Q2 and any further deterioration in the unsecured microfinance and credit card portfolios.