AUBANK

Near 52-Week High, Valuations Limit Upside

(AU SFB) reported a strong Q3FY26 performance, marked by robust growth in advances, improved margins, and sustained asset-quality gains. Net profit rose 19% sequentially to ₹668 crore, beating estimates, largely due to lower provisions as bad-debt stress eased. While operating profit growth was modest, the bank’s retail-heavy franchise and improved funding mix supported industry-leading performance. Profitability and Provisions - Net profit: ₹668 crore, up 19% QoQ. - Pre-provision operating profit: ₹1,235 crore, up 2% QoQ. - Gross NPAs fell to 2.3%, net NPAs steady at 0.88%. - Provisions cut by 31% QoQ, saving ₹150 crore. - Credit costs declined 31 bps, offsetting higher opex from labour code changes. Asset Quality and Recoveries - Seasonal uptick in recoveries from secured assets. - Unsecured portfolios (microfinance, credit cards) showed early signs of normalization. - Slippages declined 13% sequentially, extending asset-quality improvement trend. Advances and NII Growth - Advances grew 19% YoY to ₹1.3 trillion, outpacing industry. - Net interest income (NII): ₹2,341 crore, up 16% YoY. - Cost of funds fell 22 bps QoQ, aided by improved deposit mix. - Net interest margin (NIM): 5.7%, up from 5.45% in Q2. Operating Expenses and Expansion - Opex rose 12% QoQ to ₹1,850 crore, or 27% YoY excluding exceptional items. - Increase driven by manpower, distribution expansion, and marketing. - Added 27 new branches during the quarter, supporting growth momentum. - Stock trades near ₹1,030 (52-week high), at 3.2x FY27 book value. - Valuations may cap near-term upside. - Sustained recovery in unsecured loans, stronger deposit growth, and operating leverage from universal banking transition could drive earnings upgrades. - Competitive deposit environment and rising opex remain key risks.