This article first appeared on GuruFocus .
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Deposits Growth:10% quarter-on-quarter and 23% year-on-year.
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Margins:Expanded by 24 basis points quarter-on-quarter to 5.96%.
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Cost-to-Assets Ratio:Declined by 19 basis points to 4.1% excluding CD SMU premium; 4.2% including premium.
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Slippages:Declined by 17% quarter-on-quarter to INR659 crores.
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GNPA Ratio:Declined by 27 basis points to 2.3%.
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Credit Costs:0.6% for Q4; 96 basis points for the full year.
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Profit for the Quarter:Grew by 25% quarter-on-quarter and 65% year-on-year to INR832 crores.
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ROA:Improved to 1.8% for the quarter.
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Profit After Tax for Full Year:Grew by 25% to INR2,641 crores.
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ROE:14.2% for the full year.
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CASA Ratio:Stable at 28%.
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Cost of Funds:Declined by 32 basis points year-on-year to 6.75%.
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Retail Secured Assets Growth:21% year-on-year.
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Wheels Book Growth:27% year-on-year to approximately INR46,400 crores.
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Gold Loan Business:Doubled to approximately INR4,000 crores.
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Commercial Banking Growth:29% year-on-year and 12% quarter-on-quarter to around INR31,000 crores.
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Inclusive Banking Franchise Growth:8% sequential growth.
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Net Interest Income Growth:10% quarter-on-quarter; 14% for the full year.
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Core Other Income Growth:7% quarter-on-quarter; 13% for the full year.
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Operating Expenses:Increased by 6% quarter-on-quarter.
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Provisions:Down 19% quarter-on-quarter; 10% for the full year.
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Dividend:INR1 per share for FY26.
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Release Date: April 27, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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AU Small Finance Bank Ltd ( NSE:AUBANK ) reported a strong quarterly performance with a 25% quarter-on-quarter and 65% year-on-year profit growth, reaching INR832 crores.
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The bank's deposit growth remained robust at 10% quarter-on-quarter and 23% year-on-year, driven by MFI and personal loans.
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Margins expanded by 24 basis points quarter-on-quarter to 5.96%, aided by a decline in the cost of funds and higher NPA resolution.
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Asset quality showed improvement with slippages declining by 17% quarter-on-quarter, leading to a GNPA ratio reduction by 27 basis points to 2.3%.
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The bank is embedding AI into its core operations, which is expected to enhance customer experience, productivity, and scalable growth without proportional cost increases.
Negative Points
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Geopolitical tensions in West Asia are impacting global energy prices and currency markets, elevating overall risk sentiment.
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The unsecured portfolio saw a year-on-year decline of 1%, indicating challenges in this segment.
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Despite improvements, the cost-to-assets ratio remains a focus area, with ongoing investments in manpower, distribution, and technology.
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The bank's credit costs for the full year were at 96 basis points of average assets, indicating room for further improvement.
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The competitive market in the mortgages business, particularly in affordable housing, poses challenges for disciplined pricing and underwriting.
Q & A Highlights
Q: Can you provide more details on the INR21 crores contingency provision created in Q4? A: Vivek Tripathi, Chief Credit Officer, explained that these are normal business banking, working capital cases. The risk assessment was done internally, and there is nothing specific or high-value about these cases.
Q: Are there challenges in raising incremental deposits, or are interest rate hikes a strategic move? A: Sanjay Agarwal, CEO, stated that the bank is not focusing on a single data point for liabilities. The strategy involves balancing cost of money, CASA, retail versus wholesale, and overall CD ratio. The bank aims to build a stable liability franchise with a focus on quality and quantity.
Q: With ROA at 1.8%, what is the focus for the future, and what levers are available to drive it? A: Sanjay Agarwal mentioned that the goal is to maintain or achieve this ROA on a full-year basis. The focus will be on improving operating efficiency and reducing credit costs, particularly in MFI and credit card businesses.
Q: How will technology investments, including AI, impact business volumes and cost ratios? A: Sanjay Agarwal highlighted that AI and technology are crucial for connecting the bank's diverse operations and improving productivity. While it's early to quantify cost reductions, AI is expected to enhance productivity, channel distribution, and risk management.
Q: What is the strategy for geographical liability expansion as the bank transitions to a universal bank? A: Sanjay Agarwal emphasized the focus on building a pan-India liability franchise, opening 80-100 new branches annually, and investing in brand development. The bank aims to strengthen its retail deposit base and leverage the universal banking license for growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
