AU Small Finance Bank Limited, an Indian scheduled commercial small finance bank, headquartered in Mumbai, reported robust financial results for the third quarter of FY26, delivering double-digit profit growth, healthy balance-sheet expansion and stable asset quality in a competitive banking environment.
For the quarter ended December 31, 2025, the company posted a 26.3 % year-on-year increase in net profit, with PAT increasing to ₹668 crore compared with ₹528.4 crore in Q3 FY25. Total income rose by over 15 % YoY to ₹5,451 crore in Q3 FY26. Net interest income grew 16 % YoY to ₹2,341 crore, driven by robust loan portfolio growth and improved pricing dynamics.
Net interest margin improved to approximately 5.7 %, up 25 basis points quarter-on-quarter, highlighting improved cost of funds and efficient asset mix execution. Pre-provisioning operating profit (PPoP) also showed modest improvement with a 3 % YoY rise, reflecting disciplined operating leverage alongside strategic investments in distribution and technology.
Loan book growth was significant, with gross loans up 19.3 % YoY to about ₹1.29 trillion. Deposits expanded 23.3 % YoY to around ₹1.38 trillion, underscoring strong customer confidence and franchise reach. The CASA ratio remained stable near 29 %, suggesting sustained low-cost funding strength. These trends reflect ongoing execution on core banking fundamentals, with both retail and secured segments contributing to growth.
Gross non-performing assets (GNPA) ratio stood at around 2.3 %, marginally improved year-on-year. Net NPA ratio improved to approximately 0.88 %, supported by disciplined credit risk management. Slippages declined sequentially by 13 %, reflecting seasonal improvement in secured asset performance and normalization in unsecured portfolios. Credit cost moderated sharply, aiding profitability momentum.
Key Updates
- Added 100 touchpoints in Q3 including 27 new liability branches mostly in urban markets; total 270 touchpoints added in YTD FY26.
- Onboarded Mr. Ranbir Kapoor and Ms. Rashmika Mandanna as brand ambassadors.
- Launched new brand campaign “Soch Badlo aur Bank Bhi”.
- Received approval from Govt. of India for increase in foreign investment limit in the paid-up capital of the Bank from 49% to maximum permissible limit of 74%.
Market Reaction and Outlook
Investor sentiment responded positively, with AU SFB shares advancing following the strong quarterly performance and earnings beat compared to market expectations. Analysts noted the bank’s improving interest margins, disciplined credit cost management, and broad-based growth as key positives driving investor interest.
Looking ahead, the bank’s focus on quality loan growth, stable deposit mobilization, and controlled asset quality combined with strategic expansion initiatives positions it well for continued performance in FY26 and beyond. The bank received in-principle approval from the RBI to transition into a Universal Bank in late 2025. This transition is expected to lower its cost of funds further and allow it to compete more directly with larger private banks.