Analyst Concall
AU Small Fin Bk's NIM to bottom out in Q2, improve from Q3
This story was originally published at 22:40 IST on 19 July 2025
Register to read our real-time news.Informist, Saturday, Jul. 19, 2025
Please click here to read all liners published on this story
--AU Small Fin Bk: Expect to open 70-80 new deposit branches in top cities
--CONTEXT: Comments by AU Small Fin Bank mgmt in post-earnings analyst call
--AU Small Fin Bk: Credit cost remains broadly in line with our expectation
--AU Small Fin Bk:Investing in sales, ops teams to support loan disbursement
--AU Small Fin Bk: Credit cost to remain high in Jul-Sept
--AU Small Fin Bk: See NIM moderating in Jul-Sept, improving from Oct-Dec
--AU Small Fin Bk: No FY26 guidance on return on assets, see 1.8% for FY27
--AU Small Fin Bk: See Oct-Mar to be strong in terms of recoveries
--AU Small Fin Bk: Vehicle, commercial, gold loans to drive credit growth
--AU Small Fin Bk: May get approval for universal banking licence this year
By Vaishali Tyagi, Siddhi Chauhan, and Sourabh Kumar
MUMBAI – AU Small Finance Bank's net interest margin is expected to moderate in Jul-Sept and may start improving from the December quarter, the small finance bank's senior management said in a post-earnings conference call with analysts Saturday. Moreover, the management said it hopes to get the Reserve Bank of India's approval for its application for a universal banking licence this year.
"Jul-Sept should be the bottom for NIM, and we should start seeing gradual improvements in margins from Oct-Dec onwards, assuming no further rate cut," the small finance bank's management said.
Credit cost, which the bank said was broadly in line with expectations, is also seen to remain high in Jul-Sept, "but we expect it to start normalising from the second half onwards", the management said. "Our credit cost remained elevated in Apr-Jun, driven primarily by unsecured segments." AU Small Finance Bank's credit cost was 0.34% in the June quarter, up from 0.22% a year ago, but down from 0.43% a quarter ago.
The lender's net profit for the June quarter increased 15.6% on year to INR 5.81 billion. The bottom line beat analysts' estimates owing to robust growth in its treasury income.
The bank's management refrained from giving forward guidance on return on assets in the upcoming quarters or for the financial year 2025-26 (Apr-Mar). However, it said it expects return on assets to be 1.8% in FY27. For the June quarter, the return on assets of the lender stood at 1.5%, 10 basis points higher than in the previous quarter.
The management believes the bank's recoveries will improve in Oct-Mar. It sees vehicle financing, commercial banking, and gold loans to be the drivers of credit growth in the quarters to follow. "All of these portfolios can grow anywhere between 20-25%," the management said. "That's the target we are taking."
To support loan disbursement, the bank is investing in its sales and operations teams. "We are investing in scaling up the sales and operations teams and experimenting with branch formats to increase disbursement," the management said. As on Jun. 30, AU Small Finance Bank's total loan portfolio stood at INR 1.18 trillion.
Outlining its expansion and growth plans, the management said it aims to open new branches in top cities of the country. "Our well-structured distribution channels are scaling efficiently, enabling us to deepen customer relationships and expand our deposit base sustainably," it said. "This year, we will add around 70-80 new deposit branches, mostly in the top cities," it added. Shares of AU Small Finance Bank had closed 0.3% lower at INR 794.90 on the National Stock Exchange Friday. End
Edited by Rajeev Pai
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
