AU Small Finance Bank (AUBANK) Q1 25/26 earnings summary

Executive summary

• Q1 FY25-26 saw robust deposit growth of 31% YoY and loan growth of 18% YoY, outpacing system growth rates despite a 23% decline in the unsecured book and a seasonally muted macro environment.

• PAT increased 16% YoY to ₹58,085.82 lakh, with ROA at 1.5% and ROE at 13.3%, despite margin pressure and elevated credit costs in unsecured and southern mortgage segments.

• Asset quality saw seasonal weakness; GNPA increased to 2.47% and net NPA to 0.88%.

• Board strengthened with two new independent directors; RBI evaluation ongoing for universal banking license.

• Unaudited financial results for the quarter were approved by the Board and reviewed by joint statutory auditors, who issued an unmodified opinion.

Financial highlights

• Deposit base crossed INR 1,27,000 crore, up 31% YoY; CASA grew 16% YoY and CASA ratio at 29.2%.

• Loan portfolio reached INR 117,000 crore, up 18% YoY, led by secured segments; net interest income grew 6% YoY to ₹2,045 Cr.

• Net profit for the quarter was ₹58,085.82 lakh, with total income up 21% YoY to ₹518,904.91 lakh.

• Net interest margin declined to 5.4% from 6.0% YoY due to lower asset yields and investment yields.

• Cost-to-income ratio improved to 54%, aided by treasury gains; cost of funds at 7.08%.

Outlook and guidance

• ROA guidance of 1.8% reiterated for FY27; no specific ROA guidance for FY26.

• Loan growth targeted at 2–2.5x nominal GDP, with secured segments expected to grow 20–25%.

• Margins expected to bottom in Q2 and improve from Q3 onwards, assuming no further rate cuts.

• Credit cost guidance for FY25 increased by 10-15 bps to ~1% of average total assets; full-year credit cost for unsecured expected to be higher due to delayed MFI recovery.

• Capital adequacy ratio (Basel II) at 19.42% as of June 30, 2025, indicating strong capitalization.