AU Small Finance Bank Q2 Net Profit Jumps 53% to ₹858 Crore as NII Hits ₹2,820 Crore

Delivering a standout operational performance during the second quarter of the financial year 2026-27, BSE 100 constituent AU Small Finance Bank reported an impressive 53 percent year-on-year surge in standalone net profit to touch ₹857.7 crore. The Jaipur-headquartered lender beat street expectations across core profitability parameters on Saturday, October 24, 2026, following a mild two-percent stock pullback during Friday's trading close on the Bombay Stock Exchange. Bolstered by lower funding costs, resilient net interest margins (NIM), aggressive credit card monetization, and an expanding retail loan book, the bank solidified its earnings trajectory while sustaining industry-beating deposit accretion rates across national banking corridors.Net Profit Surges 53% as Core Net Interest Income Climbs to ₹2,820 CroreThe lender registered broad-based profitability expansion during the July-September quarter of FY27:Stellar Bottom-Line Jump: AU Small Finance Bank’s standalone net profit escalated by 53 percent year-on-year to ₹857.7 crore, rising sharply from ₹561 crore reported during the corresponding quarter of the previous financial year.Core Net Interest Income (NII) Expands: The bank’s Net Interest Income—the spread earned between interest generated from advances and interest paid out on retail deposits—expanded by 31.5 percent to reach ₹2,820.1 crore compared to ₹2,144.4 crore a year ago.Core Non-Interest Income Growth: Non-interest earnings climbed 16 percent year-on-year to ₹736 crore from ₹634 crore, powered primarily by strong transactional banking turnover and recurring fee streams originating from its expanding credit card portfolio.Expanding Margins and Cheaper Capital: NIM Advances to 5.8%A disciplined balance sheet approach helped AU Small Finance Bank enhance its lending yields while compressing borrowing expenses:Net Interest Margin (NIM) Widens: The bank expanded its core Net Interest Margin to 5.8 percent, representing a solid 30-basis-point expansion from the 5.5 percent reported in the same period last fiscal.Cost of Funds Tumbles: The overall cost of mobilizing customer deposits and institutional funds dropped from 6.83 percent down to 6.41 percent year-on-year, providing structural support to core interest margins.Operating Efficiency Gains: The simultaneous widening of NIM and reduction in funding expenses shielded the bank’s operating profitability against broader competitive deposit pressures seen across the retail banking ecosystem.Asset Quality Review: Gross NPAs Improve to 1.99% as Provisioning FallsCredit quality indicators delivered largely positive signals, supported by higher provision buffers:Gross NPA Contraction: The bank’s Gross Non-Performing Asset (GNPA) ratio improved sequentially, softening to 1.99 percent from 2.10 percent in the previous quarter, marking a substantial 42-basis-point recovery compared to the previous year.Net NPA Marginal Uptick: Reflecting conservative asset classification, the Net NPA ratio recorded a mild sequential uptick to 0.81 percent from 0.76 percent registered in the previous quarter, though remaining substantially lower on an annualized basis.Robust Provision Coverage: The bank’s Provision Coverage Ratio (PCR), factoring in technical write-offs, stood at a resilient 83 percent, demonstrating solid shock-absorption capacity against delinquent retail portfolios.Reduced Loan Loss Allocations: Total credit provisions allocated for potential bad loans declined to ₹359.4 crore for the quarter, down from ₹371.5 crore in the preceding quarter and ₹480.8 crore set aside in Q2 FY26.Market-Beating Business Expansion: Deposits Climb 28.6% to ₹1.70 Lakh CroreOperational volumes showed strong traction across retail liabilities and diversified credit segments:Deposits Outpace Industry Growth: Total deposit balances jumped 28.6 percent year-on-year to ₹1,70,460 crore, clocking an expansion rate approximately 1.6 times faster than the aggregate Indian commercial banking system.CASA Ratio at 29.5%: High-quality low-cost Current and Savings Account (CASA) deposits rose by 29 percent to hit ₹50,289 crore, anchoring the overall CASA liability ratio at 29.5 percent.Gross Loan Book Hits ₹1.53 Lakh Crore: Total gross credit disbursements and loan assets advanced by 25.1 percent year-on-year to stand at ₹1,53,769 crore, driven by secured micro-business loans, vehicle finance, and expanding urban retail consumer lending.