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Informist, Friday, Oct. 17, 2025

--AU Small Fin Bank: NIM should expand next 2 qtrs sans more rate cuts 

--CONTEXT: Comments by AU Small Fin Bank mgmt in post-earnings analyst call 

By Shubham Rana and Pallavi Singhal

NEW DELHI – AU Small Finance Bank Ltd.'s microfinance segment loan book has started stabilising and the bank expects the book to start growing from the December quarter, the lender's management said Friday. The bank also expects the credit card segment to start growing in a "couple of quarters".

"MFI (microfinance institutions) book has started to stabilise with quarter-on-quarter de-growth moderating to 1%. We expect the portfolio to start growing gradually from this quarter onwards on asset quality front as bucket collection efficiency improved," the bank's management said at a post-earnings conference call with analysts.

AU Small Finance Bank's net profit fell for the first time in six quarters with higher provisions weighing on the bottom line in the September quarter. The lender's net profit fell 1.8% on year to INR 5.61 billion for the September quarter. Shares of the bank Friday closed 0.8% lower at INR 792.45 on the National Stock Exchange.

The bank's overall loan portfolio was INR 1.23 trillion, up 17% on year and 4.5% on quarter. The unsecured segement--which includes microfinance, credit card, and personal loans--makes up around 8% of the total loan portfolio. Growth in the unsecured segment fell 23% on year and 2% on quarter as of September end. The microfinance loan book was INR 61.74 billion at the end of September.

The lender's management also expects the net interest margin to continue rising in the quarters ahead, provided the Reserve Bank of India's Monetary Policy Committee doesn't lower interest rates further. Margins have been falling across the banking sector following the 100-basis-point reduction in the policy repo rate by the RBI's MPC between February and June. While the net interest margin fell to 5.5% in the September quarter from 6.1% a year ago, it was higher than the 5.4% seen in the June quarter. "Some bit of adjustment in the asset mix and some positive benefit on the cost of funds side should help the NIM to continue improving for next couple of quarters, the management said.  End

With inputs from Sagar Sen

Edited by Deepshikha Bhardwaj

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