Synopsis:
AU Small Finance Bank jumped sharply after its management gave a key commentary regarding its future that boosted investors’ morale in the company.
The shares of this leading small finance bank are in focus after positive management commentary. In this article, we will dive more into the details of the commentary and its financial performance in this latest quarter.
With a market capitalization of Rs 64,583 crore, the shares of AU Small Finance Bank Ltd made a day high of Rs 873 per share, up by 10 percent from its previous day closing price of Rs 793.75 per share. Over the past five years, the stock has delivered a return of 120 percent, almost in line with NIFTY 50’s return of 117 percent.
Reason Behind this Rally
AU Small Finance Bank mentioned that it wants to maintain a robust financial discipline while expanding at a moderate pace. To be able to handle risks properly, the bank plans to limit credit costs to less than 1 percent of the average total assets.
To be able to tap the market opportunities with a loan growth of 2–2.5 times the nominal GDP, and at the same time, to be able to guarantee operational efficiency and profitability with a cost-to-income ratio of less than 60 percent are the bank’s other goals.
Also read: Stock Crash: Why Did This Asset Management Company Fall by Up to 10% Today?
Q2 Results
AU Small Finance Bank has reported a Net Interest Income of Rs 2,144 crore in Q2 FY26, a growth of 9 percent as compared to Rs 1,974 crore in Q2 FY25. Additionally, on a quarter-on-quarter basis, it grew by 5 percent from Rs 2,045 crore. Also, Net Interest Margins shrank by 60 bps to 5.5 percent in Q2 FY26.
Regarding its profitability, it reported a net profit of Rs 561 crore in Q2 FY26 as compared to Rs 571 crore in Q2 FY25. Additionally, on a quarter-on-quarter basis, it reported a decline of 3 percent from Rs 581 crore.
Total Deposits grew by 21 percent to Rs 1,32,509 crore in Q2 FY26 as compared to Rs 1,09,693 crore in Q2 FY25. Term Deposits constituted 66.6 percent of total deposits, followed by 23.7 percent with Savings Account, 5.7 percent with current account and rest 4 percent with certificate of deposit.
Gross Advances reported in Q2 FY26 grew by 22 percent and currently stand at Rs 1,17,525 crore as compared to Rs 96,033 crore in Q2 FY25. Additionally, it grew by 5.3 percent from Rs 1,11,614 crore
However, asset quality worsened during the period. It reported a GNPA of 2.41 percent in Q2 FY26, up by bps from 1.98 percent in Q2 FY25. Similarly, NNPA was 0.88 percent in Q2 FY26 as compared to 0.75 percent in Q2 FY25. Provision Coverage Ratio (PCR) also increased by 200 bps to 84 percent in Q2 FY26.
AU Small Finance Bank Limited, based in Jaipur, operates across 21 states and 4 Union Territories. They offer a wide range of services, including treasury, retail, wholesale, and various banking operations. Their offerings cover everything from deposits and debit/credit cards to loans for vehicles, personal needs, homes, businesses, and agriculture. 0
They also provide insurance, mutual funds, and government banking services. Plus, with their digital solutions like internet and mobile banking, as well as merchant payments, they ensure convenience through branches, business correspondents, and ATMs.
Written by Satyajeet Mukherjee
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