AU Small Finance Bank shares fell as much as 10% to an intraday low of ₹846 on the BSE on October 26, 2026, following September-quarter results that showed a 53% rise in net profit. Jefferies and Motilal Oswal retained Buy ratings, although their assessments highlighted operating expenses, sequential margin pressure and pockets of credit risk alongside stronger earnings.
Key Takeaways
- The intraday share-price decline contrasted with net profit growth to ₹858 crore in Q2 FY27.
- Net interest margin improved from a year earlier but narrowed from the preceding quarter.
- Both brokerages retained Buy ratings, while Jefferies cut its target price and earnings estimates.
Table of Contents
- AU Small Finance Bank shares retreat after stronger earnings
- Annual improvement masks sequential margin pressure
- Brokerages retain Buy ratings with different qualifications
- Conclusion
AU Small Finance Bank shares retreat after stronger earnings
The bank’s profit for the second quarter of fiscal 2026–27 rose from ₹561 crore a year earlier, supported by business expansion and lower provisions. Net interest income—the difference between interest earned and interest paid—increased 32% to ₹2,820 crore from ₹2,144 crore.
The share-price move and the earnings improvement describe different developments. The available information establishes a sharp intraday decline after the results, but does not establish a single cause for the selling or provide a closing price.
The bank’s quarterly financial reports archive organizes financial results, press releases and investor presentations by fiscal year. It lists FY 2026–27, although the archive page itself does not display the detailed figures discussed here.
| Item | Details |
|---|---|
| Pre-provision operating profit | ₹1,514 crore in Q2 FY27, versus ₹1,210 crore a year earlier. |
| Provisions | ₹359 crore, down from ₹481 crore a year earlier. |
| Gross non-performing asset ratio | 1.99% at September-end, down 42 basis points year on year. |
| Net non-performing asset ratio | 0.81%, down seven basis points year on year. |
Annual improvement masks sequential margin pressure
Net interest margin reached 5.8%, compared with 5.5% in the September 2025 quarter. However, Motilal Oswal noted that the margin narrowed nine basis points from the preceding quarter, attributing the change mainly to the seasonally higher day count and shifts in the asset mix.
That distinction matters: the bank earned a wider margin than a year earlier, but the latest quarter did not extend the improvement sequentially. Lower provisions and better reported bad-loan ratios nevertheless supported the annual increase in profit.
Credit costs stood at 0.8%, below the bank’s 0.9% guidance, Motilal Oswal said. Jefferies noted that fresh slippages were marginally above its estimates, with seasonal stress in tractor loans, while asset quality in the unsecured portfolio improved.
Brokerages retain Buy ratings with different qualifications
Jefferies lowered its target price to ₹1,250 while retaining its Buy rating. It also reduced earnings estimates by 1–5% to reflect higher operating expenses and tighter bancassurance fee norms.
The brokerage forecasts compound annual loan growth of 23% and profit growth of 28% over FY27–FY29, using FY27 as a normalized base. Its projected return on equity of 15–16% is an expectation, not a reported result.
Motilal Oswal retained a ₹1,275 target and a Buy rating, citing steady business growth and lower credit costs. It expects operating expenses to moderate and the cost-to-income ratio to reach roughly 55–56% over FY27–FY28. Those targets remain brokerage forecasts rather than assured outcomes.
Conclusion
AU Small Finance Bank’s results showed stronger annual earnings, but the share-price decline came alongside continuing questions about margins, expenses and credit quality. Subsequent quarterly disclosures will provide the next check on whether operating costs moderate and the sequential margin pressure eases.
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This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.
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