AU Small Finance Bank Soars 6% Post Q4 Results: Is It Time to Buy or Sell?

The share price of AU Small Finance Bank saw a remarkable increase of over 6% on Wednesday, following the release of its Q4 financial results. Investors reacted positively, pushing the stock up by as much as 6.43%, bringing it to ₹652.75 on the Bombay Stock Exchange (BSE). This surge reflects the bank’s strong performance in the fourth quarter of FY25, where it reported a net profit of ₹504 crore, marking an impressive 18% growth compared to ₹371 crore from the previous year.

Impressive Financial Highlights

In the fourth quarter of FY25, AU Small Finance Bank achieved significant financial milestones:

Net Interest Income (NII) surged by 57% YoY, reaching ₹2,094 crore.
Other income for the quarter saw a 41% increase, amounting to ₹761 crore.
The Net Interest Margin (NIM) improved to 5.8%, up from 5.1% year-on-year.
The Pre-provisioning Operating Profit (PPoP) nearly doubled to ₹1,292 crore from ₹650 crore in the same quarter last fiscal year.

Asset Quality Shows Improvement

The bank’s asset quality is also on the upswing, with the gross non-performing assets (NPA) ratio decreasing to 2.28% at the end of March 2025, down from 2.31% in December 2024. Additionally, the net NPA ratio fell to 0.74%, improving from 0.91% quarter-over-quarter.

Growth in Loans and Deposits

AU Small Finance Bank’s gross loan portfolio expanded by 20% YoY, and deposits experienced a robust 27% growth. These figures indicate a solid foundation for future growth despite ongoing challenges in the market.

Analyst Insights on Future Prospects

When it comes to investing in AU Small Finance Bank shares, analysts have mixed views. They pointed out that the bank’s credit costs remain high and may not stabilize soon. Kotak Institutional Equities noted that while provisions related to unsecured retail loans are significant, they anticipate a gradual decline in credit costs, which could help counterbalance the pressures from the NIM.

Kotak Equities rated AU Small Finance Bank shares as an ‘Add’ with a target price of ₹650.
Nuvama Institutional Equities highlighted that while elevated credit costs are expected in the first half of FY26, improvements are anticipated in the second half. They maintain a ‘Reduce’ rating, setting a target price of ₹530 due to perceived risks.

Stock Performance Overview

Reflecting the stock’s resilience, AU Small Finance Bank shares have appreciated by 19% over the past month and recorded a 16% gain year-to-date. Over the last year, the shares have risen by 5%, while the stock has delivered an impressive 152% return over the past five years.

By 11:00 AM, AU Small Finance Bank shares were trading 5.34% higher, at ₹646.05 on the BSE, signaling continued investor confidence in the bank’s growth trajectory.

For those considering investing in the banking sector, AU Small Finance Bank presents a compelling option, especially as it navigates the complexities of a challenging economic landscape.