AU SFB slips 7% after posting Q1 results; brokerages suggest 'Reduce'

AU Small Finance Bank shares slipped 7.3 per cent in trade after the bank's Q1 numbers came in weak; Brokerages recommend 'Reduce', check target price

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AU Small Finance Bank shares slipped 7.3 per cent, logging an intraday low at ₹736.4 per share on BSE. The selling pressure came after the bank’s Q1 numbers came in weak. 

 

At 9:34 AM, AU Small Finance Bank shares pared gains and was trading 7.2 per cent lower at ₹737.35 per share on the BSE. In comparison, the BSE Sensex was down 0.2 per cent at 81,653.42. 

 

The company's market capitalisation stood at ₹55,197.64 crore. The 52-week high of the stock was at ₹840.95 per share, and the 52-week low of the stock was at ₹479 per share.   CATCH STOCK MARKET LATEST UPDATES LIVE

Brokerages' view on AU Small Finance Bank Q1 results 

AU Small Finance Bank reported its June quarter (Q1FY26) results on Saturday. Post Q1, the brokerages have maintained a ‘Reduce’ rating on the stock owing to weak performance. 

 

Emkay Global Financial has maintained a ‘Reduce’ rating on the stock with a target of ₹725 per share on the backdrop of  higher valuations (2.6x FY27E ABV) amid a weak core performance and persistent asset quality stress. It also trimmed the FY26-27E earnings by 2-3 per cent.

 

AU Small Finance Bank reported weak core performance, said Emkay Global in its note, with margins declining sharply by 40 basis points (bps) quarter-on-quarter (Q-o-Q) to 5.4 per cent, although higher treasury gains and surprisingly lower non-staff opex, amid bidding for a Universal Banking license led to a 6 per cent profit after tax (PAT) beat, at ₹580 crore/1.5 per cent return on asset (RoA).   ALSO READ | Reliance shares slip 2% as Q1 misses estimates; more selling ahead? 

Further, the asset under management (AUM) growth moderated to 17.9 per cent year-on-year (Y-o-Y)/1.7 per cent (Q-o-Q), largely due to a sharp decline (23 per cent Y-o-Y/7 per cent Q-o-Q) in Unsecured businesses (MFI and Credit Card). This, along with rising stress in the used HCV/SCV segments, Microfinance Institutions (MFI) and the South-based secured mortgage portfolio, led to a 19 bps increase in gross non-performing asset (GNPA) to 2.5 per cent, as also credit cost, the brokerage noted. 

 

Nuvama Institutional Equities has also iterated a ‘Reduce’ rating on AU Small Finance Bank with a revised target of ₹650 per share from ₹530. 

 

According to Nuvama, AU Small Finance reported a soft quarter in Q1FY26 with a miss on net interest margin (NIM) and higher-than-expected delinquencies driven by south-based mortgages and a delayed recovery in MFI. Credit cost on credit cards also remained elevated on a downsized book.

 

The brokerage expects NIM to fall in Q2 as well with the full impact of the 75 bps repo rate cut.   ALSO READ | Brokerages up target on JSW Steel despite valuation worries after strong Q1

How did AU Small Finance Bank perform in Q1?

In Q1, the small finance bank posted a 16 per cent growth in net profit to ₹581 crore during the first quarter of this financial year.

 

The Jaipur-based bank had earned a net profit of ₹503 crore in the same quarter of the previous fiscal year. Its total income rose to ₹5,189 crore during the June 2025 quarter from ₹4,278 crore in the same period of FY25.

 

Interest earned by the bank improved to ₹4,378 crore compared to ₹3,769 crore in the June quarter of FY25.

 

Meanwhile, net interest income rose to ₹2,045 crore during the quarter against ₹1,921 crore a year ago.