AU SFB Q1: net profit up 37% YoY to ₹796 Cr as credit costs ease, income up 21%

AU Small Finance Bank opened FY27 with standalone net profit of ₹795.95 Cr for Q1 (quarter ended June 30, 2026), up 37.0% year-on-year from ₹580.86 Cr, comfortably outpacing the 21.1% rise in interest income to ₹5,302.74 Cr. There are no one-off items on either side, so the reported and adjusted growth are the same — a genuinely strong print led by a normalising credit cycle rather than accounting noise. Basic EPS rose to ₹10.63 from ₹7.80.

The profit beat sits almost entirely on the provisioning line: provisions and contingencies fell ~30% YoY to ₹371.49 Cr (from ₹533.31 Cr), while pre-provision operating profit grew a more modest 9.4% YoY to ₹1,435.47 Cr. The margin picture is two-sided — net profit margin (PAT/total income) expanded to 13.28% from 11.19% a year ago on the lower credit cost, but the core operating margin (pre-provision profit on interest income) compressed to 27.07% from 29.97%, reflecting faster balance-sheet growth and a higher cost base as employee cost rose ~23% YoY to ₹1,063.92 Cr. Sequentially the quarter was softer: PAT slipped 4.3% QoQ from ₹831.87 Cr as provisions climbed ~38% off the March low, even as income grew 5.7% QoQ. Asset quality was broadly stable, with gross NPA at 2.10% (vs 2.47% a year ago) and net NPA at 0.76%.

The stock went into the print at ₹1,004, down 5.9% over the past month of trading.

The print aligns with the bank's provisional Q1 disclosures (deposits +23.5%, gross advances +25.8% YoY) and lands near the upper half of the street's ₹4,831–5,441 Cr revenue expectation range (Univest). Against management's own FY27 guidance from the Q4 concall — full-year ROA of 1.8%, cost-to-assets below 4%, credit cost ~90 bps — Q1 return on assets came in at 0.42% (not annualised), which annualises to roughly 1.68%, tracking modestly below the 1.8% target this early in the year. Capital adequacy stayed healthy at 18.93%.