AU Small Finance Bank reported a 52.9% year-on-year increase in standalone net profit to ₹857.69 crore for the second quarter of FY27, compared with ₹560.87 crore in the corresponding quarter last year. The results, approved by the board on October 24, 2026, were supported by stronger net interest income, a wider net interest margin and lower provisions. Total income increased to approximately ₹6,382 crore from ₹5,224 crore a year earlier.
The Jaipur-headquartered lender also reported growth in deposits and advances, alongside an improvement in gross non-performing assets compared with the previous year. Net interest income rose 31.5% to ₹2,820 crore, while the net interest margin increased to 5.8% from 5.5%. However, operating expenses continued to rise, and net NPAs increased slightly compared with the previous quarter, making credit quality and cost control important indicators to watch in the coming quarters.
Key Takeaways
- Net profit: Rose 52.9% year on year to ₹857.69 crore from ₹560.87 crore.
- Net interest income: Increased 31.5% to ₹2,820.08 crore.
- Total income: Climbed 22.2% to ₹6,381.99 crore.
- Net interest margin: Improved to 5.8% from 5.5% a year ago.
- Deposits: Increased 28.6% year on year to ₹1.70 lakh crore.
- Gross advances: Rose 27.9% to ₹1.50 lakh crore.
- Asset quality: Gross NPA declined to 1.99% from 2.41% a year earlier.
- Capital adequacy: Stood at 18.54%, compared with 18.78% in the year-ago quarter.
AU Small Finance Bank Q2 FY27 Results: Key Numbers
The following table compares the bank’s standalone performance in the July–September quarter of FY27 with the corresponding period of FY26. Figures are rounded where indicated.
| Financial metric | Q2 FY27 | Q2 FY26 | YoY change |
|---|---|---|---|
| Total income | ₹6,381.99 crore | ₹5,223.99 crore | +22.2% |
| Interest earned | ₹5,611.81 crore | ₹4,510.89 crore | +24.4% |
| Net interest income (NII) | ₹2,820.08 crore | ₹2,144.00 crore | +31.5% |
| Net profit (PAT) | ₹857.69 crore | ₹560.87 crore | +52.9% |
| Gross NPA ratio | 1.99% | 2.41% | Improved |
| Net NPA ratio | 0.81% | 0.88% | Improved |
| Net interest margin (NIM) | 5.8% | 5.5% | +30 basis points |
| Capital adequacy ratio | 18.54% | 18.78% | -24 basis points |
Source: Moneycontrol and AU Small Finance Bank’s quarterly reports.
Net Profit Rises 53% as Interest Income Strengthens
AU Small Finance Bank’s net profit reached ₹857.69 crore in Q2 FY27, representing an increase of approximately ₹297 crore from the ₹560.87 crore recorded a year earlier.
The improvement was accompanied by growth in the bank’s interest income and net interest income. Interest earned increased 24.4% to ₹5,611.81 crore, while NII grew faster, rising 31.5% to ₹2,820.08 crore.
Net interest income is the difference between interest earned on loans and other interest-generating assets and the interest paid on deposits and borrowings. It is a key measure of a bank’s core lending and funding performance.
The faster growth in NII indicates that the bank generated more net interest revenue relative to its interest costs. A combination of loan growth, changes in the lending mix and lower funding costs contributed to the improved performance.
The result is significant because sustained growth in core banking income can support profitability without relying exclusively on one-off gains or non-core revenue. However, maintaining this pace will depend on funding costs, credit demand and the bank’s ability to manage future loan losses.
Net Interest Margin Improves to 5.8%
The bank’s net interest margin increased to 5.8% in Q2 FY27 from 5.5% in Q2 FY26, an improvement of approximately 30 basis points.
NIM measures the net interest income a bank earns relative to its interest-earning assets. A higher margin generally indicates that the bank is retaining more net interest income from those assets.
According to the quarter’s reported figures, the bank’s cost of funds declined to 6.41% from 6.83%, a reduction of 42 basis points. At the same time, gross advance yields fell by around 27 basis points, partly reflecting a change in the loan mix.
The decline in funding costs helped offset the pressure from lower lending yields. This supported the improvement in the overall margin.
For investors, the sustainability of NIM will be an important factor in future results. If deposit costs remain manageable, the bank may be able to preserve profitability. However, competition for deposits and changes in interest rates could affect margins in subsequent quarters.
Total Income and Operating Performance
Total income rose 22.2% to ₹6,381.99 crore from ₹5,223.99 crore in the year-ago quarter. Interest earned accounted for the largest component of the increase.
Core other income also expanded, rising 16% year on year to ₹736 crore, according to the reported results summary. Growth in business volumes, credit-card issuance and transaction-banking fees contributed to the increase.
Operating expenses rose 26% to ₹2,077 crore from ₹1,647 crore. The increase reflects the costs associated with expanding the business, including the infrastructure and personnel required to support more customers and banking operations.
Despite higher expenses, core pre-provision operating profit increased 31% to ₹1,480 crore from ₹1,131 crore.
This measure indicates the bank’s operating earnings before provisions and taxes. Its growth suggests that income expansion outpaced the increase in the core operating cost base, although continued expense growth will remain an important consideration.
Deposits and Advances Continue to Expand
AU Small Finance Bank reported strong growth in both deposits and lending during Q2 FY27.
| Business metric | Q2 FY27 | Q2 FY26 | YoY growth |
|---|---|---|---|
| Total deposits | ₹1,70,460 crore | ₹1,32,509 crore | 28.6% |
| CASA deposits | ₹50,289 crore | ₹38,963 crore | 29.1% |
| Gross loan portfolio | ₹1,53,769 crore | ₹1,22,877 crore | 25.1% |
| Gross advances | ₹1,50,291 crore | ₹1,17,525 crore | 27.9% |
Source: Business Upturn’s Q2 FY27 results summary.
Total deposits increased by nearly ₹38,000 crore over the year, while gross advances expanded by approximately ₹32,800 crore.
Deposits are especially important for a bank because they provide funding for lending and other assets. Strong deposit growth can support loan expansion, but the cost and stability of those deposits matter as much as the headline growth rate.
The bank’s current account and savings account deposits, commonly known as CASA, reached ₹50,289 crore. The CASA ratio stood at 29.5%, indicating that these balances accounted for a meaningful portion of the bank’s deposit base.
The challenge ahead will be to sustain deposit growth without significantly increasing funding costs.
Asset Quality Improves, but Quarterly Trends Need Attention
The bank’s gross non-performing asset ratio declined to 1.99% in Q2 FY27 from 2.41% a year earlier. Its net NPA ratio also improved year on year, falling to 0.81% from 0.88%.
Lower NPA ratios generally indicate that a smaller proportion of a bank’s loan book is classified as non-performing. These measures are important because deteriorating loans can reduce interest income and require additional provisions.
Net provisions fell to approximately ₹359 crore from ₹481 crore in the year-ago quarter, helping support the increase in reported profit. The annualised credit cost, including the guarantee premium, declined to 0.8% from 1.2%.
There is, however, a sequential detail worth watching: the net NPA ratio increased to 0.81% from 0.76% in Q1 FY27, even as the gross NPA ratio improved from 2.10% to 1.99%. This does not by itself establish a deterioration in the overall loan book, but it shows why investors should examine both year-on-year and quarter-on-quarter trends.
First-Half FY27 Performance
AU Small Finance Bank also reported stronger earnings for the first six months of FY27.
| Financial metric | H1 FY27 | YoY growth |
|---|---|---|
| Net profit | ₹1,654 crore | 45% |
| Core pre-provision operating profit | ₹2,906 crore | 36% |
The first-half figures indicate that earnings growth was not limited to a single quarter. However, maintaining this performance will depend on continued business expansion, funding costs, credit quality and operating efficiency.
The Bigger Picture
AU Small Finance Bank’s Q2 FY27 performance highlights the role of core interest income, deposit mobilisation and lower provisions in driving profitability. Net profit grew faster than total income, supported by higher NII, improved margins and lower provisions compared with the previous year. At the same time, rising operating expenses and the small sequential increase in net NPAs show that growth needs to be balanced with cost discipline and careful credit monitoring.
For the wider small finance banking sector, the results underline the importance of building stable deposit franchises while expanding lending. Banks that can attract deposits at competitive rates, maintain underwriting standards and control operating costs are better positioned to support sustainable growth. AU Small Finance Bank’s future performance will depend on how effectively it maintains that balance.
FAQs
1. What was AU Small Finance Bank’s net profit in Q2 FY27?
The bank reported standalone net profit of ₹857.69 crore for Q2 FY27, up approximately 52.9% from ₹560.87 crore in Q2 FY26.
2. What was AU Small Finance Bank’s NII in Q2 FY27?
Net interest income rose approximately 31.5% year on year to ₹2,820.08 crore from ₹2,144 crore.
3. What was the bank’s net interest margin?
The net interest margin increased to 5.8% in Q2 FY27 from 5.5% in the year-ago quarter.
4. Did asset quality improve in Q2 FY27?
On a year-on-year basis, gross NPA improved to 1.99% from 2.41%, while net NPA declined to 0.81% from 0.88%. Sequentially, net NPA rose from 0.76% in Q1 FY27, so both trends warrant monitoring.
5. What were AU Small Finance Bank’s deposit and loan growth rates?
Total deposits increased 28.6% year on year to ₹1.70 lakh crore, while gross advances rose 27.9% to ₹1.50 lakh crore.
Looking Ahead
The next quarters will show whether AU Small Finance Bank can sustain strong deposit and loan growth while keeping funding costs under control. Investors will also watch net interest margins, credit costs, NPA trends and operating expenses to determine whether the current pace of profit growth is sustainable.
The Q2 FY27 results show stronger earnings and improving year-on-year asset-quality ratios, but they should be considered alongside valuation, future guidance, capital requirements and broader banking-sector conditions. Quarterly profit growth alone is not sufficient to determine whether a stock is attractively valued, and this report is not investment advice.
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