AU Small Finance Bank (AUBANK) – Q1 FY26 Earnings Highlights
(Not Rated)

Date: Weekend announcement | Quarter: Q1 FY26

Key Financial Highlights
PAT: ₹581 Cr

YoY: +16%

QoQ: –5%

12% above Bloomberg consensus on the back of:

Surge in treasury income: +1,479% YoY

Controlled opex: Up only 4% YoY

Net Interest Income (NII): +6% YoY

Sluggish growth due to lower advances and margin compression

Pre-Provision Operating Profit (PPOP): +33% YoY

Helped by 69 bps QoQ improvement in Cost-to-Income ratio

Credit Cost: Up 40 bps YoY

Gross NPAs: Rose 19 bps QoQ

Business Metrics

Advances (AUM)
Growth: +18% YoY / +1.7% QoQ

Drivers:

Secured Retail Book: +20% YoY

Commercial Banking: +28% YoY

Decliners:

Unsecured Retail Book: –24% YoY / –6.7% QoQ

Deposits
Growth: +31% YoY / +2.8% QoQ

CASA Growth: +16% YoY / +2.6% QoQ

Margins (NIMs)
Current NIM: 5.4% (down ~40 bps QoQ)

Drivers:

Yield on advances fell 30 bps

COF improvement of 6 bps softened impact

Asset Quality
Slippages from: Credit Cards, MFI, and South India home loan book

Credit Cost Guidance for FY26: Revised upward by 10–15 bps to 100 bps

Management Commentary & Outlook
NIM Outlook:

Impacted by: high liquidity, repo rate cuts, and shift away from unsecured loans

Expected bottom in Q2 FY26, recovery seen in H2 FY26, full normalization by FY27

70% of book is fixed rate → slower rate transmission benefit

Deposit Strategy:

Rate cuts on SA (–50 bps) and TDs (–90 bps) to improve funding cost

Growth Guidance:

No formal AUM target due to macro uncertainty

25% growth unlikely; realistic growth drivers:

Wheels

Gold Loans

Commercial Banking

Credit Costs & Asset Quality:

Stress noted in MFI and home loans in South India

Credit Card delinquencies elevated, but isolated to known risk pools

Collection efficiency (CE) expected to improve from Q2 as infra improves

CGFMU cover: Nearly all new disbursements; full coverage by FY26-end

ROA Outlook:

FY26 ROA expected to improve over FY25

FY27 ROA guidance maintained at 1.8%

Branch Expansion:

Plan to open 70–80 new branches in FY26, focused on liabilities

HCV & Used HCV Segment:

Industry under stress, but AU exposure limited (~6% of Wheels book)

Bottoming out of stress in Q1, stabilization likely in Q2

Investor Takeaways
Operating performance exceeded expectations due to treasury gains and cost control.

Asset quality under pressure in unsecured and southern portfolios but manageable.

Margins and growth likely to recover gradually in the second half of FY26.

Conservative tone from management given macro uncertainty, but fundamentals remain solid.