AU Small Finance Bank’s Q4FY25 results drew mixed reactions from top brokerages, with recommendations ranging from ‘Reduce’ to ‘Overweight’. The bank reported a 4.7% QoQ decline in net profit to ₹503.7 crore, even as net interest income (NII) rose 3.5% QoQ to ₹2,093.9 crore. Asset quality saw marginal improvement, with gross NPA at ₹2,477 crore (2.28%) and net NPA at ₹791.3 crore (0.74%), compared to 2.31% and 0.91% respectively in the previous quarter. However, provisions rose to ₹635.1 crore from ₹501.7 crore QoQ. These metrics have sharpened the focus on the bank’s exposure to the MFI segment and outlook for FY26.
CITI on AU Small Finance Bank share price
Citi has maintained a Neutral rating with a target price of ₹625. The bank posted a 1.36% RoA, aligning with Citi estimates. Fee income rose 15% QoQ while treasury gains of ₹1,000 crore helped build accelerated provisions worth ₹1,500 crore, pushing credit coverage on unsecured GNPAs to 100%. However, this led to an increase in credit cost to 2.5% versus 2.06% QoQ. NIMs dropped by 7bps due to a shift in asset mix. Citi estimates NIMs to sustain at 5.7% through FY26E and FY27E and highlighted that the bank’s universal license approval is expected by CY26.
Morgan Stanley on AU Small Finance Bank share price
Morgan Stanley has reiterated its Overweight rating with a target price of ₹750. The bank reported a robust 1.5% RoA—among the highest in its peer set—despite prevailing high interest rates and asset quality concerns. The brokerage expects further improvement in RoA over the next two years as the rate cycle eases and MFI-related stress subsides. AU Small Bank remains Morgan Stanley’s top pick among mid-sized private lenders.
Nuvama on AU Small Finance Bank share price
Nuvama has downgraded its view to Reduce with a target price of ₹530. The firm highlighted a 15% miss on consensus credit cost expectations, which rose to 2.5% of GLP from 1.95% QoQ. Credit cost in the cards segment also surged to 16% from 11% QoQ. Slippage declined 7% QoQ due to improved collection efficiency in MFI and secured loans, though data isn’t directly comparable with peers. NIM contracted by 6bps QoQ and was partially cushioned by day count. Core PPOP rose just 2.7% QoQ. Management guided for elevated credit costs in H1FY26 with potential improvement in H2.
Going forward, investors will closely watch regulatory progress on the universal banking license and the evolution of MFI-related asset quality metrics. While some brokerages remain bullish on long-term growth, near-term stress in unsecured segments and rising credit costs may continue to weigh on sentiment.
Disclaimer: The views expressed are those of individual brokerages and do not represent those of the author or publication. Investors are advised to consult certified financial advisors before making any investment decisions.
