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Informist, Thursday, Aug. 7, 2025

By Kabir Sharma

MUMBAI – Equitas Small Finance Bank is likely to report a sequential decline in its net profit for the June quarter due to elevated credit cost, according to the brokerages tracking the lender. Additionally, a slower rate of loan growth is anticipated to strain the lender's profitability and cost of funding. The bottom line, which is expected to show an on-year increase, will be cushioned by a low base. 

The lender is expected to post a standalone net profit of INR 289.43 million for the June quarter, according to the average of estimates from seven brokerages. The net profit is expected to fall by more than 31% sequentially but rise over 12% on year. The highest estimate for the company's net profit is INR 554 million from Emkay Global Financial Services Ltd. while the lowest estimate is INR 65 million from Centrum Broking Ltd.

Out of the 10 brokerages who have rated the lender, four have a 'buy' rating on the stock and five have a sell rating. One brokerage recommends to hold the stock. Shares of the bank ended 0.7% lower at INR 56.92 on the National Stock Exchange. 

The small finance bank's net interest income for the June quarter is expected to fall by nearly 1% on quarter but rise by more than 2% on year to INR 8.2 billion. The highest estimate for net interest income is INR 8.40 billion from Centrum Broking Ltd. The lowest estimate is INR 8.03 billion from Antique Stock Broking Ltd. 

Brokerages are divided on the outlook for the net interest margin of the bank. While Kotak Equities sees the NIM falling further due to the steady shift in the loan mix away from microfinance, Centrum Broking expects the net interest margin to go up by 10 basis points driven by lower cost of funds. The bank's net interest margin declined by more than a percentage point on year to 7.13% in the March quarter. On quarter, the fall was 26 basis points. The net interest margin fell because of a decline in lending to the microfinance segment, the bank had said. 

The credit cost of the small finance bank is expected to remain elevated on the back of persistent stress in the microfinance portfolio, brokerages said. The credit cost of the bank was at 2.74% at the end of March, and brokerages expect it to remain around the same level in the June quarter as well. The bank had said in its investor presentation for the previous quarter that "...fresh delinquencies from microfinance is expected to reduce as collections in Karnataka strengthens." "We expect FY26 to be a normalised credit cost year for this segment," the bank had said. 

The bad loan ratios of the bank are also expected to be under pressure due to the rise in credit costs, brokerages said. As of Mar. 31, the gross non-performing asset ratio of the bank was 2.89%, and the net non-performing asset ratio was 0.98%.

Analysts will track the asset quality of the microfinance business where the recovery has been a bit slower for Equitas as compared to peers. The small finance bank is scheduled to declare its earnings on Friday.

Following are the June quarter earnings estimates for Equitas Small Finance Bank based on reports from seven brokerage firms in descending order of estimate of net profit:

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Edited by Akul Nishant Akhoury

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