Capital Small Finance Bank has reported a 7% year-on-year increase in quarterly profit, reaching ₹32.00 crores, despite facing challenges from its NBFC/MFI exposure. The bank demonstrated resilience in its core operations while navigating through sector-specific headwinds.

Key Financial Highlights

• Profit Growth: Quarterly profit rose to ₹32.00 crores, marking a 7% year-on-year increase.
• Deposit Growth: Total deposits grew by 17.1% year-on-year to ₹9,110.00 crores.
• Advance Growth: Gross advances increased by 16.4% to ₹7,437.00 crores.
• Net Interest Margin (NIM): The bank maintained a healthy NIM of 4.1%.
• CASA Ratio: Current Account Savings Account (CASA) ratio stood at 35.9%.

Asset Quality and Credit Costs

The bank's asset quality faced some pressure, primarily due to its NBFC/MFI exposure:

• Gross NPAs: Stood at 2.7%
• Credit Costs: Rose to 0.37%, with 0.19% attributed to slippage from NBFC/MFI exposure
• NBFC/MFI Exposure: Remains below 1% of the total portfolio

Operational Performance

• Operating Profit: Grew by 24%, supported by a 38% increase in non-interest income
• Branch Expansion: Plans to add 20-25 branches in the fiscal year

Management Outlook

The bank's management expects the MFI-related credit cost increase to be temporary and limited to the first quarter. They have set a target of 20% advance growth for the fiscal year.

Analyst Conference Call Insights

During the earnings conference call, the bank's management provided additional context and future outlook:

• Deposit Strategy: The bank raised deposits after interest rate cuts, focusing on competitive pricing while maintaining cost efficiency.
• Credit Growth: Targeting 20% credit growth for FY'26, with a focus on secured lending in MSME, mortgage, and agriculture segments.
• Geographical Expansion: Aiming to reduce dependency on Punjab while exploring growth opportunities in Haryana and other states.
• Asset Quality: Management expressed confidence in recovering from the recent NBFC/MFI-related slippage and maintaining stable asset quality going forward.
• Net Interest Margin: The bank aims to maintain its NIM around the current level of 4.1%, leveraging its growing fixed-rate advance book and improved CD ratio.

Capital Small Finance Bank's performance in the face of sector-specific challenges underscores its resilient business model and strategic focus on secured lending. As the bank continues to expand its geographical footprint and diversify its loan book, it remains well-positioned to capitalize on growth opportunities in the small finance banking sector.

Capital Small Finance Bank has announced the appointment of Mr. Bhavdeep Sardana as an Additional Director and released its financial results for the first quarter of fiscal year 2026, showcasing robust growth across key metrics.

New Director Appointment

The bank's Board of Directors has approved the appointment of Mr. Bhavdeep Sardana as an Additional Director (Non-Executive Non-Independent) effective August 04, 2025. This appointment was initially announced with a typographical error in the effective date, which has been corrected through a corrigendum.

Mr. Sardana brings a wealth of experience to the board, currently serving as Sr. V.P. & CEO of The Sukhjit Starch & Chemicals Limited, a company with an annual turnover of around ₹1,500.00 crore and manufacturing facilities across multiple states. With 30 years of experience in commercial, administrative, operations, and management roles in agro-based food industries, Mr. Sardana is expected to contribute significantly to the bank's strategic direction.

Q1 FY26 Financial Highlights

Capital Small Finance Bank has reported impressive financial results for Q1 FY26:

• Deposits: Total deposits increased to ₹9,110.00 crore, registering a year-on-year growth of 17.10% and a quarter-on-quarter growth of 9.50%.
• Advances: Gross advances stood at ₹7,437.00 crore, reflecting a year-on-year growth of 16.40% and a quarter-on-quarter growth of 3.50%.
• Profit After Tax: The bank reported a profit after tax of ₹32.00 crore, up 7.00% year-on-year.
• Asset Quality: Gross NPAs stood at 2.70% as of June 30, 2025, while Net NPAs were at 1.40%.
• CASA Ratio: The Current Account Savings Account (CASA) ratio remained healthy at 35.90%.

Key Performance Indicators

The bank maintained its net interest margin at 4.10% despite the declining interest rate regime. The operating profit grew by 24.00%, supported by a 38.00% increase in non-interest income and a reduction in the cost-to-income ratio to 60.50%.

Mr. Sarvjit Singh Samra, Managing Director & CEO of Capital Small Finance Bank, commented on the results: "We are pleased with our performance in Q1 FY26, marked by stronger deposit growth, healthy credit growth, and stable interest margins. Despite industry challenges, we've maintained a focus on building a granular, high-quality loan book, prioritizing segments with stable repayment behavior and long-term value."

The bank's loan book remains well-diversified, with 99.80% being secured and zero direct microfinance exposure, aligning with its retail-centric lending approach. The strong performance in Q1 FY26 sets a positive tone for Capital Small Finance Bank's growth trajectory in the current fiscal year.