AU Small Finance Bank Ltd.Strong Profitability Momentum

AU Small Finance Bank delivered robust Q3 FY26 results, demonstrating strong operational momentum across key metrics.

The bank reported 26% quarter-on-quarter PAT growth to ₹668 crore, with ROA expanding to 1.6% as it progresses toward its 1.8% FY27 target. Net interest margin improved significantly by 25 basis points to 5.7%, driven by a 22 basis points decline in cost of funds and CRR cut benefits. Management expects further margin expansion over the next two quarters from ongoing term deposit repricing. Credit costs declined sharply to 78 basis points annualized from 119 basis points in Q2, supported by MFI collection efficiency reaching a six-quarter high of 99.5% and 83% CGFMU guarantee coverage.

The loan portfolio grew 19.3% year-on-year, led by Wheels business at 27% growth and Gold Loans at 52% growth. Deposit growth remained sector-leading at 23% year-on-year, 1.8 times system growth. The bank is aggressively implementing AI across operations, with fraud systems auto-decisioning over 60% of alerts and voice bots handling 25% of inbound calls, while maintaining 20-22% loan growth guidance.