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What the record says.
ESAF Small Finance Bank reported Q4 FY26 PAT of ₹24 crore, a sharp sequential improvement from ₹7 crore in Q3, driven by portfolio rebalancing toward secured assets (now 61% of advances) and lower slippages. Gross NPA declined to 5.4% from 6.9% YoY, while NIM expanded to 7.3% from 6.6% QoQ. Disbursements grew 88% YoY to ₹12,926 crore, with 78% in secured loans. Management guided for steady-state credit cost of 2% by FY28 and ROA target of 2%, supported by a 20-25% loan growth trajectory and cost-to-income ratio of ~65%. Key risk: elevated credit costs may persist through FY27 due to legacy NPA provisioning.
Colored figures show movement against the previous available record.
Guidance to track
- Management reiterated the goal to increase secured loan share to 70% by end of FY27, up from 61% currently.
- CFO guided that normalized credit cost will be around 2% from FY28 onwards, as legacy provisioning clears.
- Management expects to achieve a return on assets of 2% by FY28, with traction visible in the next two quarters.
- The bank expects annual loan growth of 20-25%, excluding IBPC sales, supported by network leverage.
Risks flagged
- CFO acknowledged that backlog provisioning on NPA stock will continue through FY27, keeping credit costs above steady-state 2%.
- As the bank shifts to secured lending (lower yields), NIM may trail loan growth; management guided NIM around 7% plus/minus 0.5%.
- Core banking upgrade (Bank 2.0) is expected to complete by Q3 FY27; delays could impact operational efficiency.
Key quotes
- The growth is back and the asset quality problems are almost over and going forward we will be on a steady kind of growth.
- Steady state basis a 2% credit cost is an expected kind of stuff going forward.
- We are planning to have an ROA of 2% and that too we will target to achieve by FY28.
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