This article first appeared on GuruFocus.
Release Date: November 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Equitas Small Finance Bank Ltd (BOM:543243) reported a significant improvement in credit cost, reducing it to 2.16% in Q2 FY26 from 6.48% in Q1 FY26.
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The bank’s gross advances grew by 9% year-on-year to 39,123 crores, with a notable 17% growth in the non-MFI book.
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The bank’s capital adequacy ratio remains strong at 20.74%, further strengthened by a recent capital raise.
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Equitas Small Finance Bank Ltd (BOM:543243) has successfully expanded its gold loan offerings, now available in over 200 branches, contributing to a book of about 400 crores.
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The bank’s retail deposits constitute 75% of the total deposit base, indicating a stable and growing customer base.
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The net interest margin contracted to 6.29% from 7.69% in the same quarter last year, reflecting a reduction in the microfinance portfolio.
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The microfinance portfolio contracted by 40%, impacting the overall yield on advances.
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Gross NPA remains stable at 2.82%, but the net NPA is at 0.95%, indicating room for improvement in asset quality.
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The bank reported a low return on assets of 0.18% and return on equity of 1.65%, suggesting challenges in profitability.
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The bank’s net interest income declined due to a reduction in the microfinance mix, impacting overall financial performance.
Q: Where do you see the net interest margin (NIM) settling over the next 2 to 3 quarters? A: Unidentified_2 (CEO): We expect the NIM to reverse its drop in the third quarter and strengthen between the third and fourth quarters. By the end of the year, the NIM should cross 6.5%, and on a steady-state basis, it should be within 6.5% to 7%.
Q: How are you seeing the trends in net slippages going forward? A: Unidentified_4 (CFO): Net slippages are expected to further reduce in Q3 for both MFI and non-MFI segments. We anticipate normalcy by Q4, with significant improvements in collection efficiencies and reduced fresh overdues.
Q: Can you provide a breakup of the gross slippage in terms of MFI and non-MFI? A: Unidentified_2 (CEO): We have not provided gross slippage figures due to inconsistencies in comparisons. We have focused on net slippages for clarity.
Q: What is the strategy for the microfinance (MFI) book, and will you increase its share in the overall portfolio? A: Unidentified_4 (CFO): Our strategy is to maintain the MFI book at around 8% to 10% of the overall advances mix. We are comfortable with this level and do not plan to increase it significantly.
