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AU Small Finance Bank Ltd — Q4 FY26
AU Small Finance Bank delivered a strong Q4 FY26 with PAT of ₹832 crore (+65% YoY) and ROA of 1.8%, driven by margin expansion (+24bps QoQ to 5.96%), lower credit costs (0.6%), and robust deposit growth (+23% YoY).
bullish
high
Financial stats pending filing verification
2-Minute Summary
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AU Small Finance Bank delivered a strong Q4 FY26 with PAT of ₹832 crore (+65% YoY) and ROA of 1.8%, driven by margin expansion (+24bps QoQ to 5.96%), lower credit costs (0.6%), and robust deposit growth (+23% YoY). Loan book grew 21% YoY led by secured assets (wheels +27%, gold loan doubled). Asset quality improved with GNPA down 27bps to 2.03%. Management guided for FY27 credit cost around 90bps and cost-to-assets below 4%, while targeting sustainable compounding at 2-2.5x nominal GDP growth. Key risk: margin pressure from seasonal Q4 benefits reversing and cost of funds potentially bottoming out.
Promises0 met · 2 missedRisks4 trackedTranscriptfull text
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Risk Intelligence
Margin pressure from seasonal Q4 benefits reversing
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Deposit Growth (YoY)
23%
+23% YoY
Deposits grew 23% YoY vs estimated private sector banking growth of 13%.
Loan Growth (YoY)
21%
+21% YoY
Loan portfolio grew 21% YoY, with secured assets growing 23% YoY.
CASA Ratio
28%
Flat YoY
CASA ratio stable at 28% despite strong deposit growth.
Cost of Funds (FY26)
6.75%
-32bps YoY
Full-year cost of funds declined 32bps to 6.75% from 7.07% in FY25.
What Changed vs Last Quarter
NEW
Credit cost around 90bps for FY27
Management guided to build credit cost around 90bps for next year, with potential savings from normalization in MFI and credit card portfolios.
NEW
Cost-to-assets below 4% in FY27
Management expects cost-to-assets (ex-CGFMU) to decline below 4% in the current financial year, from 4.1% in FY26.
NEW
Sustainably compound at 2-2.5x nominal GDP growth
The bank aims to grow at 2 to 2.5 times India's nominal GDP growth rate over the long term.
NEW
Target cost of funds around repo rate long-term
Management's long-term aspiration is to bring cost of funds to around the prevailing repo rate, currently 5.25%.
DROPPED
FY26 credit cost guidance of ~1% of average assets
Management reiterated that full-year credit cost for FY26 is expected to be around 100 basis points of average assets.
DROPPED
ROA target of 1.8% in 4-5 quarters
The bank aims to achieve a sustainable ROA of 1.8% over the next 4-5 quarters, driven by operating leverage and margin improvement.
DROPPED
Cost-to-income ratio below 60%
Management expects cost-to-income ratio to remain below 60%, with a target range of 56-57% for the next year.
DROPPED
Loan growth of 20-22% for next year
The bank targets loan growth of around 20-22% for the next financial year, consistent with 2.25-2.5x nominal GDP growth.
NEW RISK
Margin pressure from seasonal Q4 benefits reversing
Q4 margins benefited from lower day count and lower slippages; these are unlikely to recur in Q1, potentially compressing NIMs.
NEW RISK
Cost of funds may have bottomed out
Management noted that with recent rate increases, cost of funds may have bottomed, limiting further margin expansion.
NEW RISK
ECL guidelines impact on credit cost post universal bank transition
Analyst raised concern about new ECL norms; management deferred guidance, stating it's too early to comment, indicating potential uncertainty.
NEW RISK
Geopolitical tensions and second-order effects
Management acknowledged risks from West Asia tensions on fuel prices, inflation, and consumption, though direct exposure is limited.
RISK GONE
Intense competition in southern markets
Management noted that southern markets are overcrowded with intense competition, making it challenging to ramp up growth quickly.
RISK GONE
Potential derailment of MFI recovery
MFI recovery is broad-based but could be disrupted by external events; management hopes no such events occur.
RISK GONE
Elevated opex due to distribution expansion
Operating expenses increased 14% QoQ due to higher disbursements, headcount additions, and marketing spend, which may pressure near-term profitability.
RISK GONE
Credit card business still loss-making
Digital banking (including credit cards) continues to be loss-making and management expects it to take another year to stabilize.
🤫 Topics management stopped discussing
Mentioned in Q2 FY26, Q3 FY26
Operating expenses increased 14% QoQ due to higher disbursements, headcount additions, and marketing spend, which may pressure near-term profitability.
Mentioned in Q2 FY26, Q3 FY26
Management reiterated that full-year credit cost for FY26 is expected to be around 100 basis points of average assets.
Fast read
Guidance and risk preview
Management guided to build credit cost around 90bps for next year, with potential savings from normalization in MFI and credit card portfolios.
Q4 margins benefited from lower day count and lower slippages; these are unlikely to recur in Q1, potentially compressing NIMs.
View Risks →