AU Small Finance Bank Limited has released its provisional business update for the quarter ended December 31, 2025, showcasing robust growth across key financial metrics. The bank has also announced its board meeting and conference call scheduled for January 20, 2026, to discuss Q3FY26 unaudited financial results.

Strong Deposit and Advance Performance

The bank demonstrated impressive year-on-year growth with total deposits surging 23.3% to reach ₹1,38,420.00 crores, compared to ₹1,12,260.00 crores in the same period last year. This substantial increase reflects the bank's enhanced ability to attract customer deposits in a competitive banking environment.

Gross advances showed even stronger momentum, expanding by 24.0% year-on-year to ₹1,25,210.00 crores from ₹1,00,989.00 crores. This significant growth in lending activity indicates robust credit demand and the bank's continued focus on portfolio expansion.

CASA Deposits and Ratio Analysis

CASA deposits grew by 16.1% year-on-year to ₹39,950.00 crores, though the CASA ratio declined to 28.9% from 30.6% in the previous year. This decrease suggests customers may be preferring higher-yielding term deposits in the current interest rate environment.

Comprehensive Loan Portfolio Expansion

The bank's gross loan portfolio, including securitized and assigned portfolios, expanded by 19.3% year-on-year to ₹1,29,900.00 crores. Notably, the securitized and assigned portfolio decreased to ₹4,690.00 crores, indicating a strategic shift toward retaining more loans on the balance sheet.

Conference Call and Board Meeting Details

The bank will host a group conference call with analysts and investors on January 20, 2026 at 06:00 PM IST, where senior management will discuss the financial results for the quarter and nine months ended December 31, 2025. The board meeting is also scheduled for the same date to consider and approve the unaudited financial results.

The conference call will be accessible through multiple dial-in numbers including universal access numbers, local access numbers for India, Hong Kong, Singapore, UK, and USA. A replay facility will be available from January 20-21, 2026.

Regulatory Compliance and Performance Outlook

The provisional figures were disclosed under Regulation 8 of SEBI (Prohibition of Insider Trading) Regulations, 2015, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The conference call announcement was made under Regulation 30 of SEBI regulations. Pursuant to SEBI regulations, the trading window for designated persons and their immediate relatives remains closed from January 1, 2026, till January 22, 2026.

AU Small Finance Bank's Q3 performance demonstrates continued strong growth trajectory with robust expansion in both deposits and advances, positioning the bank favorably in the competitive small finance banking sector despite the slight decline in CASA ratio.

Small finance banks in India are grappling with mounting pressure in their microfinance operations, with ESAF Small Finance Bank (ISIN: INE949L01017) among those facing significant challenges. Recent data reveals a concerning trend in the microfinance sector, particularly affecting ESAF and its peers.

Microfinance Portfolio at Risk

According to data from Sa-Dhan, approximately 20% of the microloan portfolios of three small finance banks - ESAF, Suryoday, and Utkarsh - are currently at risk. As of June-end, the portfolios at risk for more than 30 days stood at:

This high-risk exposure is largely attributed to the banks maintaining a 45-55% share of unsecured microloans in their portfolios.

ESAF's Financial Struggles

ESAF Small Finance Bank has been particularly hit hard by these challenges. In the June quarter, the bank:

• Sold ₹362.00 crore worth of loans to asset reconstruction companies
• Wrote off ₹371.00 crore

These actions have significantly impacted the bank's financial performance, resulting in reported losses for the period.

Asset Quality Deterioration

The asset quality of these small finance banks has seen a marked decline:

• ESAF's gross Non-Performing Asset (NPA) ratio stood at 7.48%
• Utkarsh's gross NPA ratio increased to 11.40% from 9.40% in the previous quarter
• Suryoday reported a gross NPA of 8.50%

Rating Downgrades

The financial stress has not gone unnoticed by rating agencies:

• CareEdge lowered ESAF's Tier 2 bonds to 'A-/negative'
• Icra downgraded Utkarsh's subordinated debt by two notches to 'A/negative'

Looking Ahead

The continued asset quality deterioration and high credit costs are expected to impact profitability for these banks in the September quarter and potentially for the full fiscal year. This situation underscores the challenges faced by small finance banks in managing their microfinance portfolios amidst economic uncertainties.

ESAF's Financial Performance

Despite the current challenges, it's worth noting ESAF's financial trajectory over the past few years:

While the bank has shown strong growth in revenue and profitability over the past year, the current microfinance stress poses significant challenges for its future performance. Investors and stakeholders will be closely watching how ESAF and other small finance banks navigate these turbulent times in the microfinance sector.