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Informist, Monday, Oct. 13, 2025

 

NEW DELHI – A surge in provisions and a fall in net interest income are expected to weigh on Ujjivan Small Finance Bank's net profit for the quarter ended September. A slowdown in operating profit and pressure on credit cost are also expected to drag the small finance bank's bottom line.

 

Credit cost is likely to remain benign for most players in the banking sector, except for those with sizeable microfinance business like Ujjivan Small Finance Bank, Kotak Institutional Equities said. "Credit cost is likely to remain elevated because of residual provisions for the microfinance stress, but it might decline quarter on quarter," the brokerage said in a report.

 

Ujjivan is expected to report a net profit of INR 1.13 billion for the September quarter, down 51% from a year ago, according to the average of estimates from five brokerages. Sequentially, however, the net profit is seen rising nearly 10%. 

 

The brokerages had somewhat divergent views on the small finance bank's net profit, possibly due to the difference in estimates of provisions by each brokerage. Kotak Institutional Equities has the lowest estimate for net profit at INR 984 million, while Emkay Global Financial Services Ltd. has the highest at INR 1.33 billion. The small finance bank is scheduled to report its September quarter earnings on Friday.

 

Ujjivan's provisions are seen rising sharply to INR 2.24 billion in Jul-Sept from INR 1.51 billion in the corresponding quarter a year ago, ICICI Securities Ltd. said in its report. Sequentially, the provisions are seen almost flat. Kotak Institutional Equities sees the lender's provisions rising 46% on year in Jul-Sept to INR 2.20 billion. "We expect a sharp earnings decline of ~60% yoy led by a sharp increase in provisions YoY, while operating profit is expected to decline ~25% YoY," the brokerage said in a report.

 

Ujjivan Small Finance Bank reported a nearly 66% year-on-year decline in its net profit for the June quarter, primarily due to an increase in total expenses and a doubling of provisions. The Bengaluru-based bank's net profit for the June quarter had fallen to INR 1.03 billion as it made provisions worth INR 2.25 billion, a sharp jump from INR 1.10 billion in the year-ago quarter.

 

Since the company announced its June quarter results, the small finance bank's stock has risen 7%. Monday, the stock ended 0.1% lower at INR 48.74 on the National Stock Exchange. Ujjivan Financial Services Ltd., which commenced operations as a non-bank financial company in 2005, started operations as a small finance bank in February 2017 after getting the license from the Reserve Bank of India.

 

Currently, the bank is looking for a universal banking license. The small finance bank is hopeful of getting a commercial bank licence by December, its Managing Director and Chief Executive Officer Sanjeev Nautiyal had said in a press conference on Sept. 9. As part of its growth plan, the bank plans to raise INR 20 billion of equity through a qualified institutional placement, Nautiyal had said. 

 

For the quarter under review, brokerages have divergent views on Ujjivan Small Finance Bank's asset quality, with Kotak Institutional Equities expecting the bank's slippages to fall modestly sequentially because of the lower opening Special Mention Account book for Jul-Sept. Emkay, on the other hand, sees slippages remaining high due to stress in Tamil Nadu and Karnataka.

 

At the end of June, the small finance bank's net non-performing asset ratio had risen to 0.70% from 0.41% a year ago, while gross NPA was unchanged at 2.52%. ICICI Securities sees net NPAs at the same level at the end of September, but sees gross NPAs improving slightly on year and on quarter to 2.4%. Special Mention Account identifies loan accounts with incipient stress before they become non-performing assets. In the post-earnings call with analysts, the small finance bank's management had said they expect to contain gross NPA below 2.5% in FY26. 

 

The small finance bank's net interest income for the September quarter is seen slightly lower at INR 9 billion from INR 9.44 billion a year ago. On a quarter-on-quarter basis, the net interest income is seen up 5.1%. Estimates for net interest income range from INR 8.93 billion to INR 9.07 billion. 

 

As per the provisional figures, Ujjivan Small Finance Bank's gross advances rose 14% on year to INR 345.88 billion as of Sept. 30 and total deposits increased 15% on year to INR 391.01 billion. 

 

Of the 10 brokerage reports on the small finance bank available with Informist, eight have a 'buy' rating with an average target price of INR 52 per share. Two brokerages have a 'hold' rating on the lender. 

 

The following are the Jul-Sept earnings estimates for Ujjivan Small Finance Bank from five brokerages in descending order of the estimate of net profit in INR million:

 

Brokerage	Net Interest Income	Net Profit
Emkay Global Financial Services Ltd	8,925	1,330
ICICI Securities Ltd	9,005	1,236
JM Financial Institutional Securities Pvt Ltd	8,959	1,083
YES Securities (India) Ltd	9,073	1,032
Kotak Institutional Equities	9,037	984
Average	8,999	1,133

 

 

End

 

Edited by Saji George Titus

 

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