$AUBANK

AU Small Finance Bank (SFB) gained 5% on July 27 after the lender reported a 37% year-on-year increase in net profit for the June quarter to Rs 796 crore, driven by lower provisions and an expansion in net interest margin (NIM). The bank, which is in the process of transitioning into a universal bank, had posted a net profit of Rs 581 crore in the corresponding quarter last year and Rs 832 crore in the preceding quarter. Executive Director Vivek Tripathi described the June quarter as one of the bank's strongest first quarters in recent years. He said the lender achieved more than 20% of its annual business target during the first three months of FY27, significantly higher than the typical 15% contribution expected in what is usually a seasonally weak quarter for the banking sector. Despite global geopolitical headwinds, demand remained robust. This is reflected not only in our business growth but also in high-frequency economic indicators such as GST collections and e-way bill generation. Core net interest income (NII) rose 32% year-on-year to Rs 2,695 crore, supported by 23% loan growth and a 47-basis-point expansion in NIM to 5.9%. Tripathi added that retail deposits grew faster than bulk deposits during the quarter, while the bank's cost of funds appears to have bottomed out, improving by 1 basis point sequentially. Asset quality also strengthened during the quarter. Overall slippages declined 22% year-on-year to Rs 798 crore from Rs 1,022 crore, although they were higher than the Rs 659 crore reported in the previous quarter. The gross non-performing assets (GNPA) ratio improved to 2.10%, compared with 2.47% in the preceding quarter.