Are Capital Small latest results good or bad?

Capital Small Finance Bank's latest financial results for Q2 FY26 indicate a mixed operational performance. The bank reported a net profit of ₹34.89 crores, reflecting a quarter-on-quarter growth of 9.00% and a year-on-year increase of 4.65%. This marks the bank's strongest quarterly performance to date. Additionally, net interest income reached ₹111.64 crores, showing a sequential increase of 1.69% and a year-on-year growth of 10.62%.
Total income for the quarter was ₹279.60 crores, up 3.57% from the previous quarter and 12.16% year-on-year, primarily driven by interest earned on advances, which rose to ₹256.46 crores. However, operating profit before provisions experienced a slight decline of 1.32% from the previous quarter, indicating some pressure on operational efficiency.

While the bank demonstrated strong profitability metrics, asset quality remains a concern, with a gross NPA ratio of 2.74%, which is higher than the peer average. This ratio has shown a marginal increase from the previous quarter, suggesting ongoing challenges in managing credit risk. The net NPAs also increased to 1.39%, highlighting the need for close monitoring of asset quality as the bank continues to expand its loan book.

The bank's return on equity stands at 9.71%, showcasing effective capital utilization, and its net interest margin averaged 4.35%, providing a buffer against potential credit cost increases. However, the decline in the CASA ratio to 35.90% points to some pressure on low-cost deposit mobilization, which could impact net interest margins moving forward.

Overall, Capital Small Finance Bank's results reflect a steady growth trajectory in profitability, but persistent asset quality challenges warrant attention. The company saw an adjustment in its evaluation, reflecting the balanced nature of its operational strengths and weaknesses.