Equitas SFB may raise FY27 loan growth guidance above 25%

Equitas Small Finance Bank is poised to upgrade its full-year advances growth guidance to over 25% following a strong first half, while anticipating minimal disruption from the widespread drought in Maharashtra. The lender initially projected a 20% expansion in advances for the current financial year, 2026-27 (FY27). However, the April-June quarter of 2026 (Q1FY27) growth reached 28%, and the momentum has continued into the July-September quarter of 2026 (Q2FY27). Asset quality metrics are also tracking ahead of initial estimates. The bank guided for a full-year credit cost of 1.5%, but recorded just 1.36% in the first quarter, typically the weakest period for collections. Full-year credit costs are now expected to fall below the 1.5% mark. While net interest margins, which stood at 7.24% in the first quarter, face a projected 15 basis point compression due to higher deposit rates, this will be offset by lower credit costs and reduced operating expenses. Consequently, the bank expects to comfortably exceed its target of a 1.2% return on assets for the full year and a 1.5% exit rate in the fourth quarter. Addressing the recent declaration of drought across 74% of Maharashtra, affecting 265 of the state's 358 talukas, the management sees limited risk to the loan book. Equitas does not issue direct agricultural loans, relying instead on its microfinance portfolio to meet priority sector lending requirements.