Are Equitas Sma. Fin latest results good or bad?

Equitas Small Finance Bank's latest financial results for Q2 FY26 present a complex picture of recovery amidst ongoing challenges. The bank reported a net profit of ₹24.14 crores, marking a significant turnaround from a loss of ₹223.76 crores in the previous quarter, reflecting a dramatic sequential improvement. However, the underlying operational metrics reveal areas of concern, particularly regarding net interest income and asset quality.
Total income for the quarter was ₹1,846.29 crores, which represents a decline of 4.86% from the previous quarter, although it shows a modest year-on-year growth of 2.93%. The bank's net interest income contracted to ₹773.68 crores, indicating pressure on its core lending operations. Additionally, the gross non-performing asset (NPA) ratio remained unchanged at 2.92%, which is above the industry average, raising concerns about asset quality and the bank's ability to manage credit risk effectively.

The bank's operating profit before provisions fell to ₹240.56 crores, down 23.58% from the previous quarter, while provisions and contingencies were significantly reduced, allowing for a return to profitability. However, the provision coverage ratio of 67.03% suggests that vigilance on asset quality remains necessary.

Equitas Small Finance Bank's balance sheet showed a robust growth in total deposits, increasing by 19.31% year-on-year, which supports its lending activities. However, the advance-to-deposit ratio of 101.92% indicates that the bank is lending beyond its deposit base, which could pose liquidity challenges.

In terms of evaluation, the company saw an adjustment in its evaluation following these results, reflecting the mixed signals from its financial performance. The bank's return on equity turned negative at -1.69%, which is significantly lower than its peers, highlighting issues with capital efficiency and profitability sustainability.

Overall, while Equitas Small Finance Bank has demonstrated a recovery in net profit, the persistent challenges related to asset quality, margin compression, and operational efficiency warrant close monitoring as the bank navigates its path forward.