AU Small Finance Bank (AUFI.BO): Demonstrates Resilience in a Seasonally Soft Quarter

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AU Small Finance Bank (AUFI.BO): Demonstrates Resilience in a Seasonally Soft Quarter

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26 Jul 2026 18:36:47 ET │ 19 pages

AU Small Finance Bank (AUFI.BO)

Demonstrates Resilience in a Seasonally Soft Quarter

CITI'S TAKE

AUBANK demonstrated resilience in a seasonally soft quarter, delivering

RoA of 1.6-1.7% that surpassed expectations, anchored by steadfast core

operating metrics. NII registered growth of 32% YoY /4% QoQ, supported by Buy

a minimal sequential decline in NIM of just 7 bps (on an elevated 4Q base) Price (24 Jul 26 15:30) Rs1,014.70

— better-than-anticipated result. Credit costs continued a normalization

Target price Rs1,225.00trajectory at to 0.8% (1.1% of loans), driven by improvement in unsecured

slippages and stable secured slippages. Loan growth of 23% YoY was led by Expected share price return 20.7%

wheels, gold loans, commercial assets, PL/BL. Factoring 22% AUM growth, Expected dividend yield 0.2%

credit cost of 1.1%/1.0%, and NIMs of 5.8%/5.8% for FY27E/FY28E, we

Expected total return 20.9%model RoA/RoE of 1.8-1.9%/17-19%. An improved asset quality outlook

warrants a 1-2% earnings upgrade for FY27E/FY28E (FY29E introduced). Market Cap Rs760,608M

Retain TP, Maintain Buy. US$7,876M

NIMs Sequential Dip Seasonal and Better-Than-Anticipated — Sequentially, NIM

moderated by 7bps (better than our estimate of >20bps) on reversal of certain Q4

seasonal tailwinds — lower slippages, higher NPA recoveries, and Q4's lower day Price Performance

count — that management had flagged as non-recurring. CoF remained broadly

(RIC: AUFI.BO, BB: AUBANK IN)stable QoQ (-1bps), with some residual repricing of retail deposits still flowing

through. Yield on advances declined 6bps QoQ to 13.7%, partly reflecting ongoing

asset mix shift. Mgmt.