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What the record says.
Bajaj Housing Finance reported a balanced Q1 FY26 with AUM growth of 24% YoY and PAT growth of 21% YoY to INR 583 crore. Asset quality remained healthy with GNPA at 30 bps and NNPA at 13 bps. However, heightened competitive pricing and a benign real estate market led to higher portfolio attrition, prompting management to revise FY26 AUM growth guidance down to 21-23% from the medium-term 24-26% range. Net interest margin is expected to moderate by 15-20 bps due to lower investment and assignment income, though NII is expected to remain stable. Management expects attrition pressures to normalize by Q3 FY26, allowing a return to normal growth trajectory. Key risk: further rate cuts or sustained aggressive pricing by banks could delay recovery and pressure margins further.
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Guidance to track
- Management expects AUM growth of 21-23% for FY26, down from medium-term guidance of 24-26%, due to heightened competition and higher attrition.
- Net interest income is expected to remain stable and in line with FY25, supported by cost of fund reductions and product mix shifts.
- Net interest margin (as NTI/Assets) is expected to moderate by 15-20 bps due to lower investment income and lower assignment income.
- Return on assets is expected to remain in the 2.0-2.2% range, in line with medium-term guidance, with ROE moderating to 11-12% due to excess capital.
Risks flagged
- Additional repo rate cuts beyond the current 100 bps could prolong competitive pricing pressure and portfolio attrition, delaying the expected normalization by Q3 FY26.
- Analysts questioned whether continued pricing wars from PSU and private banks could lead to mispricing and further pressure on growth and margins.
- Planned lower portfolio assignment in FY26 will result in higher stage-1 provisioning, potentially increasing reported credit costs.
- Management acknowledged moderation in the real estate market, which could further dampen loan demand and intensify competition.
Key quotes
- Due to heightened competitive activity, pricing on the acquisition, higher portfolio attrition, and benign real estate market, AUM growth assessment for FY2026 is now expected to be in the range of 21% to 23%.
- NII is expected to remain stable and in line with FY2025. While NIM or NTI may moderate by 15-20 basis points.
- Our hope would be that by end of quarter three or so, we should be able to go back to [medium-term growth], that's why we have not changed our medium-term guidance.
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