Are AU Small Finance Bank Ltd latest results good or bad?

AU Small Finance Bank Ltd's latest financial results for the quarter ending December 2025 indicate a mixed operational performance. The bank reported a net profit of ₹667.66 crores, reflecting a year-on-year growth of 26.34%. This growth, while substantial, is a moderation compared to the previous year's rate of 40.83%. Similarly, the interest earned increased by 14.93% year-on-year, down from a significantly higher growth of 50.36% in the prior year.
The bank's net interest income (NII) also showed positive momentum, reaching ₹2,341.27 crores, which is a 15.75% increase compared to the same quarter last year. However, the net interest margin (NIM) contracted to 5.7%, indicating rising funding costs that are impacting profitability, as it decreased from 5.9% a year ago. This contraction in NIM is a critical factor to monitor, given its implications for the bank's overall profitability.

In terms of asset quality, the gross non-performing assets (GNPA) improved slightly to 2.3%, remaining stable compared to the previous quarter. The net NPA also held steady at 0.88%, suggesting effective risk management practices are in place. However, the CASA (Current Account Savings Account) ratio declined to 29.0%, which may pose challenges in mobilizing low-cost deposits and could further pressure margins.

Overall, AU Small Finance Bank is navigating a competitive landscape with a focus on growth while managing margin pressures. The company saw an adjustment in its evaluation, reflecting the complexities of its operational environment. The financial results underscore the bank's ability to generate profit and maintain asset quality, but they also highlight the need for ongoing vigilance regarding margin sustainability and deposit mobilization strategies.