AU Small Finance Bank Ltd.Record Q4, AI Transformation

AU Small Finance Bank delivered a record fourth quarter with profit after tax surging 65% year-on-year and 25% quarter-on-quarter to ₹832 crores, driving return on assets to 1.8%.

Full-year FY26 profit stood at ₹2,641 crores, up 25% with ROA at 1.6% and ROE at 14.2%. Net interest margin expanded 24 basis points quarter-on-quarter to 5.96%, supported by declining cost of funds and improved asset quality. Gross NPA ratio improved 27 basis points to 2.03% as slippages declined 17% quarter-on-quarter. The bank filed its universal banking license application in March 2026 following favorable regulatory amendments.

Management outlined aggressive AI transformation with its first AI-native loan origination system live for gold loans, expanding across all products. Deposit growth remained robust at 23% year-on-year, outpacing sector averages, while loan portfolio expanded 21% annually. Management guided FY27 credit costs around 90 basis points and expects cost-to-assets below 4%. The bank targets sustainable growth at 2-2.5 times India's nominal GDP rate, underpinned by AI-driven operational efficiency and enhanced distribution capabilities.