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

Capital Small Finance Bank Ltd's latest financial results for Q2 FY26 reflect a mixed operational performance. The bank reported a net profit of ₹34.89 crores, which shows a recovery from the previous quarter's dip, although year-on-year growth was modest at 4.65%. The total income for the quarter reached ₹279.60 crores, marking a sequential growth of 3.57% and a year-on-year increase of 12.16%, primarily driven by interest earned on advances.
Net interest income was reported at ₹111.64 crores, with a year-on-year growth of 10.62%, indicating some resilience in core lending operations. However, the bank's reliance on non-operating income, which constituted approximately 57.68% of profit before tax, raises concerns about the sustainability of its earnings.

The asset quality metrics indicate stability, with a gross non-performing asset (NPA) ratio of 2.74%, which is slightly elevated compared to previous periods but remains manageable. The net NPA ratio was contained at 1.39%, suggesting reasonable provisioning coverage.

Despite these positive aspects, the bank's performance is tempered by a decline in the CASA ratio, which fell to 35.9%, putting pressure on funding costs and net interest margins. Additionally, there has been a notable reduction in institutional investor confidence, as evidenced by declining promoter and foreign institutional investor holdings.

Overall, while Capital Small Finance Bank Ltd has demonstrated some operational stability, the dependence on non-operating income and the challenges in maintaining a strong CASA ratio highlight potential vulnerabilities. The company has experienced an adjustment in its evaluation, reflecting these underlying operational trends and concerns.