Utkarsh Small Finance Bank (UTKARSHBNK) Q2 26/27 earnings summary

Executive summary

• Q2 PPoP was ₹85 crore versus an operating loss of ₹3 crore a year earlier; NII rose 24% and provisions fell 64%, while net loss narrowed close to 80% YoY.

• H1 net loss was ₹10,377.19 lakh versus ₹58,794.52 lakh in H1 FY26; H1 credit costs fell to 2.8% from 9.1%.

• Growth remained gradual in H1, with management expecting acceleration in H2 while prioritizing underwriting quality and risk-adjusted returns; FY27 is positioned as a return-to-profitability year.

• Secured-asset growth and deposit build-up progressed as expected, while microfinance market disruption continued to weigh on results.

Financial highlights

• Q2 total income was ₹100,228.06 lakh; PPoP was ₹8,524.39 lakh, provisions ₹16,588.85 lakh, loss before tax ₹8,064.46 lakh and net loss ₹6,985.22 lakh.

• Q2 total interest earned was ₹909 crore, interest expense ₹474 crore and NII ₹435 crore; operating income rose 18% to ₹528 crore.

• H1 NII rose 14% to ₹857 crore and operating income 8% to ₹1,069 crore; H1 net loss was ₹10,377.19 lakh.

• Sep-26 balance sheet size was ₹29,090 crore, net advances ₹19,302 crore and deposits ₹23,869 crore; each grew 6%, 14% and 7% YoY, respectively.

• Deposits grew 7% YoY, CASA 14% and retail term deposits 12%; H1 cost of funds declined 50 bps YoY to 7.4%.

Outlook and guidance

• FY27 loan-book growth target is 25%-30%; management expects H2 disbursements and portfolio growth to accelerate from H1 loan growth of 7.5% YoY.

• FY28 targets include secured lending at ~55% of the portfolio, NIM of ~8.8% and ROE of 15%; a two-digit ROE exit is expected in FY27.

• Cost-to-income ratio is targeted to reach the mid-70s by FY27 exit and 60%-65% as a sustainable range in FY28.

• Priorities include growing secured MSME, housing and retail lending, retail deposits and CASA; expanding fee income and digital services; and using analytics for underwriting and collections.

• Provisioning is expected to continue on an improving, declining trajectory in H2, with profitability expected to improve in coming quarters.