AU Small Finance Bank stock up 94% in 8 mths; should you buy, hold or sell?

Analysts believe AU SFB's RoE delivery should improve from H2 aided by decline in credit cost, recovery in NIM, sustenance of fee growth, acceleration in loan growth, and controlled opex growth.

AU Small Finance Bank share price today

 

Shares of AU Small Finance Bank (SFB) hit a new high at ₹929, gaining 2 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes. The stock price of the private sector lender surpassed its previous high of ₹922.80 touched on November 10, 2025.

 

In the past one month, AU SFB outperformed the market by surging 17 per cent on the back of strong growth prospects.  In comparison, the BSE Sensex was down 0.5 per cent during the period. Further, in the past eight months, it has zoomed 94 per cent from a level of ₹479 on March 18, 2025.

 

 

At 11:28 AM; AU SFB  was trading 1.3 per cent higher at ₹924.05, as against 0.2 per cent decline in the BSE Sensex. The average trading volumes at the counter jumped nearly 15-fold. A combined 3.02 million equity shares representing 0.4 per cent of total equity of the AU Small Finance Bank changed hands on the NSE and BSE.  CATCH STOCK MARKET LIVE UPDATES TODAY

What’s driving AU Small Finance Bank stock price?

 

AU SFB received ‘in-principle’ approval from the Reserve Bank of India (RBI) for transition to Universal Bank on August 7, 2025 becoming the first institution in more than a decade to receive the approval.

 

Meanwhile, AU SFB delivered a healthy operational performance in the July to September 2025 quarter (Q2FY26) which was characterized by 12 per cent sequential decline in slippages, marginal reduction in credit cost (30 bps v/s 34 bps in Q1FY26), 5 bps improvement in net interest margin (NIM) aided by a sharp 25 bps reduction in cost of funds and reversal of excess liquidity, sustained brisk traction in secured loan book (92 per cent of GLP - grew by 5 per cent qoq/22 per cent yoy), and acceleration in core fee income growth (lending/deposits related, cross-sell and AD-1 products).

 

The management expects the broader economic environment to improve in the second half of the year supported by revival in consumer demand led by GST cuts, above average monsoon supporting rural revival, and government’s continued thrust on capex.

 

Should you buy or hold the stock?

 

AU Bank’s return on equity (RoE) delivery should improve from H2FY26 aided by decline in credit cost, some recovery in NIM, sustenance of strong fee growth, broad-based acceleration in loan growth, and controlled opex growth. Bank aspires to grow at 2-2.5x of nominal GDP growth, implying a loan portfolio growth of 20-25 per cent p.a.  Analysts at YES Securities estimate the bank to deliver a compound annual growth rate (CAGR) of 21 per cent in loan book, 19 per cent in Pre-Provision Operating Profit (PPOP) and 30 per cent in profit after tax over FY25-27. RoA/RoE are likely to reach 1.8 per cent/16 per cent in FY27. The brokerage firm expects valuation to re-rate on account of improved visibility of better performance over the coming quarters. The stock has achieved its 12-month target price of ₹921.

 

Analysts at JM Financial Institutional Securities expect the bank to deliver ~20 per cent loan CAGR and average ROA/ROE of 1.55 per cent/15.4 per cent over FY25-28E. The brokerage firm is factoring gradual normalization in credit cost supported by improvement in assets quality. Hence, have increased FY26-28E earnings estimates by ~4 per cent-16 per cent. 

 

AU’s average deposit maturity tenure is ~12-15 months which will come for repricing gradually. Hence, management guided an NIM improvement from coming quarters which will be driven by cost of funds (COF) repricing mainly. Expansion in bancassurance tie-ups and launch of forex card offering will increase customer-level engagement which will boost fee income. Management also indicated that cost-to-income/assets to decline gradually as the bank will not incur substantial cost towards transition to become a universal bank, the brokerage firm said.