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Informist, Monday, Jul. 27, 2026

 

By Radhika Tiwari

 

MUMBAI – Equitas Small Finance Bank is likely to return to profit in the June quarter after reporting a loss in the year-ago quarter, driven by strong growth in net interest income, according to the brokerages tracking the bank. However, pressure on net interest margin and a moderate growth in assets under management are likely to limit profitability.

 

The small finance bank is expected to post a net profit of INR 1.67 billion for the June quarter against a loss of INR 2.24 billion in the year-ago quarter, according to the average of estimates from seven brokerages. However, on a sequential basis, the company's net profit is likely to decline 21%. The highest estimate for the net profit is INR 1.77 billion from Elara Securities (India) Pvt. Ltd., and the lowest is INR 1.59 billion from YES Securities (India) Ltd.

 

Equitas is likely to post a net interest income of INR 9.89 billion for the June quarter, up 26% on year and 1% on quarter, according to the estimates. The highest estimate for the company's net interest income is INR 10.1 billion from JM Financial Institutional Securities Pvt. Ltd., and the lowest is INR 9.38 billion from ICICI Securities Ltd.

 

ICICI Securities expects Equitas' net interest margin to fall for the June quarter to 8%, down 32 basis points on year and 77 basis points lower on quarter. However, the bank's net interest margin is likely to be to 6.8% for the June quarter, up 61 basis points on year, but down 26 bps on quarter, according to Kotak Securities Ltd.

 

Equitas is likely to report some moderation in return on assets on quarter, led primarily by the pressure in net interest margin and higher staff costs due to annual increments, Kotak Securities said. "The asset quality of the bank is likely to remain comfortable," the brokerage said. PhillipCapital has pegged the growth of the bank's assets under management at nearly 27% on year and over 3% on quarter.

 

The net income of the bank is likely to increase for the June quarter to INR 1.66 billion, a turnaround from a loss of INR 2.23 billion reported in the year-ago quarter, JM Financial said. The pre-provision profit of Equitas is likely to increase to INR 3.93 billion, up nearly 25% on year and down 2.3% on quarter, Nirmal Bang Equities Pvt. Ltd. said.

 

Equitas Bank's gross advances rose nearly 27% on year to INR 476.53 billion as of Jun. 30, according to the provisional figures of the lender. Its total deposits increased 10% to INR 489.76 billion. The bank's current account savings account ratio fell to 25% as on Jun. 30 from 26% on Mar. 31.

 

The deposits of Equitas Bank in the June quarter are likely to increase to INR 489.76 billion, up 10% on year and down 5.3% on quarter, Nirmal Bang said. The bank's current account and savings account are likely to witness a sharp erosion by an average of 423 bps on year, the brokerage added. Its cost of funds is expected to increase 11 bps on quarter to 7%, PhillipCapital said.

 

Equitas bank has already reported 10 bps on-quarter increase in cost of funds, Kotak Securities said. "Gross slippages are expected to improve, but net slippages might increase QoQ (quarter-on-quarter) due to seasonally weaker trend on NPA (non-performing assets) recoveries/upgradations," the brokerage said. Consequentially, credit cost can see a "modest uptick."

 

"We expect 1QFY27 to be another steady quarter with negative surprises, if any, coming from possible NIM (net interest margin) contraction," Kotak Securities said, adding provisional numbers suggest a strong performance on loan growth across banks of all sizes.

 

"We expect banks to report a healthy quarter with ~14% YoY (year-on-year) PAT (profit after tax) growth in Q1FY27E supported by healthy business growth and stable asset quality, although earnings will continue to face pressure from NIM compression," JM Financial said.

 

The net interest margin is likely to remain under pressure and fall 5-10 bps due to higher growth in low-yield segments. An increase in issuances of high-priced cost of deposits in the June quarter, up 32% year-on-year, and seasonally higher agricultural slippages are also expected to add to the pressure, the brokerage said.

 

Equitas Small Finance Bank is a scheduled commercial bank. It has evolved from a microfinance institution into a mass-market retail bank and offers a range of banking products including microfinance, small business loans, vehicle loans and savings accounts, focusing on financial inclusion. The bank will detail its earnings Tuesday.  

 

Monday, Equitas Bank's shares closed at INR 79 on the National Stock Exchange, up almost 1% from Friday. The shares have risen over 18% since the bank announced its March quarter earnings on Apr. 30.

 

Of the eight research reports on the bank available with Informist, seven have a "buy" recommendation on shares while one has a "hold" recommendation. The average target price for the "buy" recommendations is INR 83.57, which is nearly 6% higher than the closing price Monday. The target price for the "hold" recommendation is INR 70.

 

Following are the June earnings estimates for Equitas Small Finance Bank from seven brokerages in descending order of net profit in INR billion:

 

Brokerages	NII	Net Profit
Elara Securities (India) Pvt. Ltd.	10.03	1.77
ICICI Securities Ltd.	9.38	1.70
JM Financial Institutional Securities Pvt. Ltd.	10.10	1.70
Kotak Securities Ltd.	10.04	1.69
PhillipCapital (India) Pvt. Ltd.	9.90	1.64
Nirmal Bang Equities Pvt. Ltd.	9.70	1.63
YES Securities (India) Ltd.	10.06	1.59
Total	9.89	1.67

 

End

 

Edited by Himanshi Gupta

 

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