ESAF Small Finance Bank reported a profit after tax of ₹24 crore for Q4 FY26, compared to ₹7 crore in Q3 FY26, reflecting sequential improvement in profitability as the bank's strategic portfolio rebalancing toward secured lending begins to bear results. The bank's management shared these highlights during its Q4 FY26 Earnings Conference Call held on May 4, 2026, with Dr. K. Paul Thomas (MD & CEO), Mr. George K. John (Executive Director), and Mr. Gireesh C.P. (EVP & CFO) addressing investors and analysts.

Business and Advances Growth

As of March 31, 2026, the bank's total business stood at ₹48,276 crore, registering 15% year-on-year growth compared to ₹42,055 crore in the previous year. Gross advances grew 19% year-on-year, while deposits increased 11% over the same period, reflecting balanced growth across both sides of the balance sheet.

The credit-deposit ratio stood at 83.5%, with retail deposits constituting 92% of total deposits and a CASA ratio of 23.9%. The bank noted that 88% of bulk deposits carry a non-prepayment clause, providing stability to its funding base. The Liquidity Coverage Ratio stood at 143.35% as of March 31, 2026.

Disbursements and Portfolio Mix

Disbursements for Q4 FY26 stood at ₹12,926 crore, reflecting 88% year-on-year growth, with secured lending constituting 78% of disbursements—marking the sixth consecutive quarter with over 75% secured share. For the full year FY26, the bank recorded its highest-ever disbursements of ₹42,530 crore, representing 103% growth over FY25.

The MARG portfolio (MSME, Agriculture, Retail, and Gold loans) was the key growth driver, with disbursements growing 133% during the year and advances growing 47% year-on-year. Gold loans and Mortgage loans each delivered growth of over 50%. The secured loan mix improved to 61% of advances from 53% a year ago, while the microfinance book remained stable at ₹8,746 crore as of March 2026, with its share reducing to 39% from 47% last year. Management reiterated the target of achieving 70% secured assets by March 2027.

Financial Performance Highlights

The following table summarizes key financial metrics for Q4 FY26:

Net interest income for the quarter was ₹518 crore, compared to ₹432 crore in Q3 FY26, with NIM improving to 7.3% from 6.6%, supported by lower cost of funds and a reduction in fresh slippages. Pre-provisioning operating profit stood at ₹241 crore, up 166% year-on-year, driven by business growth and higher fee income.

Asset Quality Improvement

Asset quality showed meaningful improvement on both a sequential and year-on-year basis. GNPA declined to 5.4% from 6.9%, and NNPA declined to 1.8% from 3.0% on a year-on-year basis. Slippages reduced significantly to ₹106 crore in Q4 FY26, compared to ₹427 crore in Q4 FY25. Notably, there were no ARC sales or technical write-offs during the quarter.

The credit cost for the current quarter stood at 1.08%, with management noting that some backlog of provisioning on the stock of NPA remains. On a steady-state basis, management indicated a credit cost of approximately 2% is expected, with FY28 cited as the horizon for normalization.

Distribution Network and Strategic Initiatives

As of March 31, 2026, the bank's distribution network comprised:

• 804 banking outlets
• 720 ATMs
• 1,047 customer service centres
• 32 institutional business correspondents
• Presence across 24 states and 2 union territories

The bank also crossed the milestone of 10 million customers during the year, with a strong representation of women borrowers. On the technology front, the ESAF 2.0 – StratoNeXt digital transformation program is progressing, with implementation expected to be completed before Q3 FY27. The initiative has been recognized with the Digital Transformation Excellence Award at the Hitachi Vantara Exchange and the Best Digital Financial Inclusion Award from the Indian Banks' Association.

Management Commentary and Outlook

During the Q&A session, management indicated a steady-state loan book growth guidance of 20% to 25%, noting that IBPC offloads of ₹650 crore during the year were not reflected in reported growth numbers. Cost-to-income ratio guidance was provided at approximately 55%, plus or minus 2%. NIM on a steady-state basis was guided at approximately 7%, plus or minus half a percentage point. Management also reiterated a target ROA of 2%, expected to be achieved by FY28, with traction anticipated over the next couple of quarters. The microfinance industry was described as showing signs of stabilization, with improving collection efficiencies and easing delinquencies supporting a more stable operating environment.

ESAF Small Finance Bank has delivered exceptional financial performance in Q4 FY26, reporting a remarkable turnaround with net profit of ₹235 crores compared to a loss of ₹1.8 billion in Q4 FY25. The bank's revenue grew significantly to ₹9.95 billion from ₹8.9 billion year-on-year, demonstrating strong operational recovery and strategic execution. The audio recording of the earnings conference call held on May 04, 2026, discussing these results, has been uploaded on the bank's website at www.esaf.bank.in for stakeholder access.

Strong Financial Turnaround and Growth Metrics

The bank's financial recovery demonstrates the effectiveness of its strategic transformation. Net profit improved dramatically to ₹235 crores in Q4 FY26 from a substantial loss of ₹1.8 billion in the corresponding quarter last year, representing a complete operational turnaround. Revenue growth of 11.80% year-on-year to ₹9.95 billion reflects the bank's expanding business operations and improved market positioning.

MARG Strategy Drives Portfolio Transformation

ESAF Small Finance Bank's MARG strategy—focusing on MSME, Agri, Retail, and Gold loans—has successfully transformed its portfolio composition. Secured loan disbursements surged 73.8% year-on-year to ₹10,134 crores during the quarter. Secured assets now constitute 61% of gross advances, up from 53% a year ago, reflecting the bank's strategic shift towards a more resilient portfolio.

Improved Asset Quality and Business Metrics

The bank demonstrated significant improvement in asset quality indicators during Q4 FY26. Gross NPA ratio improved to 5.41% from 5.64% in the previous quarter, while Net NPA ratio showed substantial improvement to 1.77% from 2.73%. These improvements reflect better risk management and portfolio quality enhancement initiatives.

Deposit Growth and Customer Expansion

Total deposits grew to ₹25,850 crores, up 11% year-on-year, while gross advances increased by 19.4% to ₹22,426 crores. Retail deposits increased by 9.4% to ₹23,674 crores, accounting for 92% of total deposits. The bank added nearly 2.3 lakh new customers during the quarter, taking the total customer base to 102.2 lakh customers.

Management Commentary and Investor Relations

Dr. K. Paul Thomas, Managing Director & CEO, highlighted the bank's strategic progress: "Q4 FY26 reflects a continued strengthening of our business with improved profitability and steady progress in asset quality. The successful execution of our MARG strategy has accelerated our shift towards a more secured, granular, and sustainable portfolio." The bank continues expanding its network, having added 16 branches in FY26, with 804 banking outlets and 720 ATMs across 24 states and 2 union territories. In line with its commitment to investor transparency, the audio recording of the earnings conference call held on May 04, 2026, at 4:00 PM IST has been made available on the bank's official website.