30-Oct-2026 08:37:20
EQUITAS SMALL FINANCE BANK Q2 FY27 CONCALL: RAISES FY27 ROA GUIDANCE TO 1.35% FROM 1.20%; EXPECTS NIM RECOVERY OF 18–20 BPS BY Q4
• FY27 ROA Guidance Upgraded: Management raised full-year ROA guidance to approximately 1.35% from the earlier 1.20%, supported by lower credit costs, NIM recovery and improving operating efficiency. • FY28 ROA Outlook: Management expects ROA to reach approximately 1.5% in FY28, with a long-term aspiration to deliver an average ROA of 1.5% over the next four years. • Q4 FY27 NIM Outlook: Management expects NIM to improve by approximately 18–20 bps from Q2's 6.69% level by Q4 FY27, as surplus liquidity gets deployed. • Medium-Term NIM Target: Management is working toward approximately 7% NIM over the next 1–2 years. • Liquidity Deployment: Most excess liquidity is expected to be deployed during Q3 FY27, with the full benefit of reduced liquidity drag reflected by Q4 FY27. • FY27 Credit Cost Guidance: Management had earlier guided for approximately 1.5% full-year credit cost. Q2 reported credit cost stood at 0.94%, or 1.12% excluding the benefit of an ARC transaction. • Advances Growth: Gross advances increased 30% YoY to ₹50,669 Cr. Management expects healthy lending momentum to continue across secured retail, housing, vehicle and small-business loans. • Deposit Growth: Deposits grew 19% YoY and 7% QoQ to ₹52,483 Cr. Management remains focused on growing its granular retail deposit franchise to support future credit expansion. • Cost of Funds Outlook: Management expects an additional 8–10 bps increase in funding costs over the next two quarters, mainly due to repricing of existing deposits. • Deposit Rate Strategy: Management currently does not plan further deposit rate hikes following the recent repo rate increase, having already raised rates in anticipation. • Asset Quality: Gross NPA improved to 2.29% and net NPA to 0.70%. Management expects stable collection efficiency and continued improvement in portfolio performance. • Microfinance Business: Collection efficiency remains around 99.6%. Management reported declining microfinance slippages and limited exposure to drought-affected regions. • Loan Segment Growth: Housing finance grew 27% YoY, MSE finance 38%, vehicle finance 16% and small-business loans 16%, supporting diversification of the advances portfolio. • Gold Loan Expansion: Gold loan capabilities have been extended to approximately 60 asset branches, with sourcing through nearly 90 additional branches, allowing expansion without substantial new branch additions. • Operating Efficiency: Cost-to-assets improved to 5.49% from 5.61% QoQ. Management expects further benefits from operating leverage as the business scales. • Q2 Profitability: Bank reported its highest-ever quarterly PAT of ₹218 Cr, with ROA of 1.31% and ROE of 13.5%, despite temporary NIM compression. • Capital Adequacy: Capital adequacy stood at 20.92% following a ₹500 Cr Tier 2 bond issuance, providing additional headroom for future business growth. • CEO Transition: Management expects to complete the MD & CEO succession process, including regulatory approval, within approximately 3–4 months. • Leadership Continuity: P. N. Vasudevan will continue as MD & CEO until his successor assumes charge. The board expects the leadership transition to have no impact on the bank's long-term strategy. • Key Risks: Higher funding costs, potential further interest-rate increases, delayed NIM recovery, regional weather-related credit stress and CEO succession execution remain important factors.
EQUITAS SMALL FIN BNK LTD