AU Small Finance Bank Limited — Q2 FY26
AU Small Finance Bank reported Q2 FY26 PAT of ₹561 crore, with NIM expanding 5 bps QoQ to 5.5% and credit cost declining to ₹481 crore.
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.
75%Questions answered1Evaded / deflected12Questions audited
Answered
High priority
Seasonality in fees and credit cost recovery in H2.
Asked by Mahrukh Adajania, Nuvama Wealth
Management provided specific seasonal explanation and reaffirmed credit cost guidance.
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Question
What's the seasonality in these quarters? 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)
Typically Q1 is slower. We saw 20% growth in disbursements QoQ. On credit cost, we see microfinance has peaked this quarter and will come down substantially in Q3 and Q4. We are confident credit cost for full year would be on guidance of 1%.
Answered
High priority
OPEX outlook and whether it will remain controlled.
Asked by Jayan Kadothe, Axis Capital
Management gave specific guidance ranges and explained seasonal dynamics.
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Question
How should we now think about OPEX? Heading into the second half, how should we think of OPEX?
Prince Tiwari (Head of IR)
Last year we were at 4.3% of average assets. This year we expect to do better. In Q3 and Q4 you will see some increase due to disbursements. Overall guidance: below 60% cost-to-income and below 4.3% OPEX to assets.
Partial answer
High priority
Loan mix and commercial book growth slowdown.
Asked by Jayan Kadothe, Axis Capital
Management explained the slowdown but did not quantify expected growth or mix shift.
no specific growth target givenattributed to macro factors
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Question
I see the commercial mix, commercial loan growth has come off. What is the thought process? Is this one-off this quarter?
Vivek Tripathi (Chief Trade Officer) and Sanjay Agarwal (Founder, MD, CEO)
Growth in commercial banking is driven by economic activity. Q1 and part of Q2 were muted. We expect strong demand in Q3 and Q4. We are not degrowing any book; we want growth back but protect yields.
Answered
Medium priority
Status of South India LAP portfolio asset quality.
Asked by Param Subramanian, Investech
Management gave specific status update and confirmed improvement.
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Question
Last time you had called out issues in the South India-based lab segment. How is that portfolio behaving as of now?
Vivek Tripathi (Chief Trade Officer) and Sanjay Agarwal (Founder, MD, CEO)
It was just one state, Andhra. We built collection and legal infra. Slippages have reduced, good recoveries from NPA pools. It's a 6-9 month cycle. It was not a problem last time also.
Answered
Medium priority
Size of the Andhra portfolio.
Asked by Param Subramanian, Investech
Management provided a specific number.
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Question
What was the size of this Andhra 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 providing any demand outlook despite repeated prompting.
declined to give directional commentattributed to early stage
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Question
If you could help us with how you're seeing demand. We are now three weeks into this post-GST cut and festive season.
Sanjay Agarwal (Founder, MD, CEO)
We are not concerned. It's very early days. We can't give direction. Growth will happen through market share rather than market growth.
Partial answer
High priority
Margin outlook for H2 and next year.
Asked by Param Subramanian, Investech
Management gave directional improvement but refused to provide a target number.
no specific NIM guidancedeclined to quantify
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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)
Impact of repo rate cut on yields is done. Deposit pricing will continue to fall for a couple of quarters. Asset mix shift and lower cost of funds should help NIM improve for next couple of quarters.
Answered
High priority
AUM mix change and NIM impact post universal bank transition.
Asked by Ramesh Varakhedka, ICICI
Management clearly stated no change in strategy and reaffirmed focus on retail assets.
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Question
Once we convert into universal banking and the minimum ticket size cap goes away, how do you see the AUM mix changing over the next two to three years? How do you see NIM settling?
Sanjay Agarwal (Founder, MD, CEO) and Vivek Tripathi (Chief Trade Officer)
No plan to go above a level in commercial banking. We love this space. Idea is to become universal to lower cost, not change asset mix. We don't play to galleries.
Partial answer
Medium priority
Growth trajectory and timeline to reach 2.5x GDP growth.
Asked by Kunal Shah, Citi Group
Management gave qualitative confidence but no quantitative timeline.
no specific timeline givendeferred to H2 strength
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Question
When we say like two and a half X of the nominal GDP average, today we are closer to 17% AUM growth. Maybe how quickly can we get towards that?
Gaurav Jain (Interim CFO)
Our secured growth is 22% YoY. Unsecured is coming to an end. We should start seeing microfinance growing from this quarter. We are reasonably confident because H2 is always stronger.
Answered
Medium priority
ECL impact positive levers.
Asked by Kunal Shah, Citi Group
Management explained specific reasons for positive view.
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Question
You confidently indicated in the presentation that ECL impact could be positive. What are the positive levers?
Gaurav Jain (Interim CFO)
Our LGDs have always been lower. In vehicle, loss given default is 35-40 bps. Coverage ratios are much higher. On an overall basis, we are not really worried.
Partial answer
High priority
Credit cost trajectory for H2 and FY27.
Asked by Nithin Agarwal, Motilal Oswal
Management gave a range for FY27 but avoided a firm commitment.
declined to give FY27 guidancecited too many variables
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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. 64 bps H1 is great. H2 generally helps reduce overall credit cost. Next year, too many variables. Our idea is to be around 80-85-90 bps benchmark.
Answered
Medium priority
Steady-state gross slippage ratio.
Asked by Piran Engineer, CLSA
Management provided a specific range for steady-state slippage.
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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)
Eventually about 2.5% kind of slippage ratio. Two and a half to three percent annualized slippage rate is where we should stabilize. We track credit costs more importantly.