AU Small Finance Bank Limited — Q2 FY26
AU Small Finance Bank reported a resilient Q2 FY26 with PAT of ₹561 crore and H1 PAT of ₹1,142 crore, up 6% YoY.
bullish
high
Financial stats pending filing verification
Claim Ledger
Did management answer the analysts?
Every material analyst question, graded on whether management actually answered it — with the verbatim exchange and quantitative claims checked against filed numbers.
67%Questions answered2Evaded / deflected12Questions audited
Answered
High priority
Seasonality in fees and credit cost recovery in H2.
Asked by Mahrukh Adajania, Nuvama Wealth
Management provided specific growth numbers and directional guidance on credit cost.
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Question
Firstly, in fees, usually in the second quarter and even in the fourth quarter, there's a lot of seasonality... Are immediate green shoots already visible in October for a significant recovery in credit costs in the second half?
Prince Tiwari (Head of IR) and Vivek Tripathi (Chief Trade Officer)
As far as other income is concerned, you're right... Even this quarter, we saw 20% growth in our disbursement numbers on a quarter-on-quarter basis... On the credit cost... we see that it has peaked in this quarter and would come down substantially in Q3 and Q4.
Answered
High priority
OPEX outlook and cost-to-income ratio guidance.
Asked by Jayan Kadothe, Axis Capital
Management gave clear guidance on cost ratios and directional improvement.
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Question
For the first half, OPEX control has been pretty strong... Heading into the second half, how should we think of OPEX?
Prince Tiwari (Head of IR)
Last year, I think we were at around 4.3% of average assets for the full year... This year, we expect to do better than that... Overall, our guidance has been that we will be below 60% in terms of cost-to-income ratio, and we will be below, say, 4.3% in terms of cost to OPEX.
Partial answer
Medium priority
Loan mix and commercial book growth strategy.
Asked by Jayan Kadothe, Axis Capital
Management gave qualitative outlook but no specific growth numbers for commercial book.
no specific growth target givenqualitative only
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Question
I see the commercial mix, I mean, commercial loan growth has come off... What is the thought process? Is this one-off this quarter, or how should we think now?
Vivek Tripathi (Chief Trade Officer) and Sanjay Agarwal (Founder, MD, CEO)
The growth in commercial banking books... is largely driven by the underlying economic activity... We expect that the strong demand should continue in Q3 and Q4... The agenda is not to degrow or grow some book on some basis... We are having a very clear agenda that growth has to come back.
Answered
High priority
Asset quality in South India LAP segment.
Asked by Param Subramanian, Investech
Management confirmed improvement and provided specific actions taken.
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Question
Last time you had called out issues in the South India-based lab segment in terms of asset quality. How is that portfolio behaving as of now?
Vivek Tripathi (Chief Trade Officer) and Sanjay Agarwal (Founder, MD, CEO)
When I highlighted... it was just one state, which is Andhra... We saw good recoveries in terms of slippage have reduced and in terms of good recoveries from NPA pools... We are hopeful that South India markets will come back to be our own numbers.
Answered
Medium priority
Size of Andhra portfolio and corrective actions.
Asked by Param Subramanian, Investech
Management gave a specific number.
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Question
If you could call out, what was the size of this portfolio?
Sanjay Agarwal (Founder, MD, CEO)
1,000 crores.
Evasive
Medium priority
Demand trends post-GST cut and festive season.
Asked by Param Subramanian, Investech
Management avoided giving any specific demand outlook despite repeated requests.
declined to give directional commentattributed to early days
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Question
If you could help us with how you're seeing demand... especially wheels or across products, how it's shaping up and how third quarter and fourth quarter to you start broadly looking.
Sanjay Agarwal (Founder, MD, CEO)
We are not concerned... It's very early days because GST cut happened last week of September, and we are just two weeks in October... It's difficult for us to comment... The growth is back... Our growth will happen through market share rather than market growth.
Partial answer
High priority
NIM outlook for H2 and next year.
Asked by Param Subramanian, Investech
Management gave directional improvement but no quantitative guidance.
no specific NIM target givenqualitative only
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Question
Margins, how to think about margins going into the second half and next year because of what is happening with the mix along with what you're doing on the funding cost?
Prince Tiwari (Head of IR)
The impact of repo rate cut on the yields is done... Assuming no more rate cuts, you would see deposit price continuing to fall for a couple of quarters... Some bit of adjustment for asset mix and some positive benefit on the cost of fund side should help the NIM to continue improving for the next couple of quarters, at least.
Answered
High priority
Asset mix and NIM impact post universal bank transition.
Asked by Ramesh Varakhedka, ICICI
Management clearly stated no change in asset mix strategy.
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Question
Once we convert into universal banking... how do you see the AUM mix changing over the next two to three years? ...how do you see NIM settling in the medium term?
Sanjay Agarwal (Founder, MD, CEO) and Vivek Tripathi (Chief Trade Officer)
There is no plan to go above a level in commercial banking... Our wheel book is only around INR 40,000 crore... We can still build that book around INR 2 lakh crore... The idea is to become universal to lower the cost, not to change the asset mix.
Partial answer
Medium priority
Growth trajectory and off-balance sheet strategy.
Asked by Kunal Shah, Citi Group
Management gave current growth rate but no specific timeline to reach target.
no specific timeline givenqualitative only
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Question
When we say like two and a half X of the nominal GDP average... how quickly can we get towards that? ...What would be the stance on the downsell after we reach that two and a half X GDP growth?
Gaurav Jain (Interim CFO)
Even if you see today, our growth has been 22% YoY on the secured side... We should start seeing microfinance growing from this quarter onwards... You should look at a GLP level... We should continue to grow within two to two and a half times.
Evasive
Medium priority
ECL impact on capital and provisioning.
Asked by Kunal Shah, Citi Group
Management declined to provide specific impact despite having pro forma estimates.
too early to commentno numbers given
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Question
With respect to ECL, what would be the positive? ...What are the positive levers which are coming from the ECL and not much of the provisioning risk?
Gaurav Jain (Interim CFO)
It's too early to actually comment on how it will play out on the exact numbers... The primary reason is that our LGDs have always been lower... On an overall basis, we are not really worried.
Partial answer
High priority
Credit cost trajectory and FY27 outlook.
Asked by Nithin Agarwal, Motilal Oswal
Management gave a range for FY27 but called it a benchmark, not guidance.
no firm guidance for FY27qualitative only
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Question
Is this credit cost that you see in H2 going to be a reflection of the trends in FY27? Do you think that will improve further?
Sanjay Agarwal (Founder, MD, CEO)
We are confident about this year... We believe that 100 bps credit cost... we all are working hard to be in that number... Next year... too many variables... Our idea is to be around, you know, 80, 85- 90 bps kind of benchmark.
Answered
High priority
Steady-state gross slippage ratio.
Asked by Piran Engineer, CLSA
Management provided a specific range for steady-state slippage ratio.
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Question
At what level would your gross slippage ratio sort of stabilize? ...What should we assume as a steady state number?
Gaurav Jain (Interim CFO) and Prince Tiwari (Head of IR)
It's about 2.5% kind of a slippage ratio we would have... two and a half to three... I think anything around 2.5%- 3% annualized slippage rate is where we should stabilize finally.