AU Small Finance Bank (AUBANK) Q2 25/26 earnings summary

Executive summary

• Received in-principle approval from RBI to transition to a universal bank, with an 18-month transition period, marking a pivotal milestone in the institution's journey.

• Demonstrated resilient performance in Q2 FY26, with strong deposit and loan growth outpacing sector averages and a focus on sustainable, predictable growth.

• Maintained a retail-focused, tech-led, and customer-centric business model with robust governance.

• Unaudited financial results for the quarter and half year ended September 30, 2025, were approved by the Board of Directors on October 17, 2025.

• Re-appointment of Mr. Sanjay Agarwal as Managing Director & CEO for three years from April 19, 2026, subject to shareholder and RBI approval.

Financial highlights

• Profit after tax for Q2 FY26 was ₹561 crore, and for H1 was ₹1,142 crore; ROA at 1.4% and ROE at 12.4% for Q2.

• Net interest income rose 9% YoY to ₹2,144 crore; NIM improved 5 bps QoQ to 5.5%.

• Deposit book grew 21% YoY to ₹1,32,509 crore, nearly double the system growth rate; loan portfolio grew 17% YoY to ₹1,22,877 crore.

• Cost of funds declined by 25 bps during the quarter to 6.83%, aiding margin expansion.

• Credit costs declined to ₹481 crore in Q2 from ₹533 crore in Q1; H1 credit cost annualized at 0.64%.

Outlook and guidance

• Expect continued improvement in margins and normalization of credit costs in H2, with full-year credit costs guided at 1% of average total assets.

• Loan growth targeted at 2x-2.5x nominal GDP, with expansion in new geographies expected to drive future growth.

• Management confident in maintaining cost-to-income ratio below 60% and OPEX below 4.3% of assets.

• Universal bank transition anticipated to enhance brand, deposit access, and product suite acceptance.

• Unsecured credit quality is stabilizing, with portfolio growth expected to resume.