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

Equitas Small Finance Bank Ltd's latest financial results for Q3 FY26 demonstrate a notable recovery in profitability, with a net profit of ₹90.03 crores compared to a loss of ₹223.76 crores in the previous quarter. This marks a significant turnaround, reflecting a 272.95% increase in net profit quarter-on-quarter. The bank achieved its highest-ever net interest income of ₹851.63 crores, although this represents a slight decline from the previous quarter's figure of ₹773.68 crores.
The bank's asset quality metrics also showed improvement, with gross non-performing assets (NPA) declining to 2.75%, the lowest level in recent quarters, and net NPA remaining stable at 0.92%. This indicates effective credit risk management and a successful cleanup of the loan book following the previous quarter's provisioning exercise.

However, the net interest margin (NIM) compressed to 6.29%, down 26 basis points from the prior quarter, continuing a trend of margin erosion over the past six quarters. This compression poses a challenge to long-term profitability, as it reflects rising costs of funds and competitive pressures in the small finance bank sector.

The bank's cost-to-income ratio averaged 65.63%, indicating that a significant portion of income is consumed by operating expenses, which may limit future profitability improvements. Despite these challenges, the CASA ratio improved to 31.0%, providing some relief on the liability side.

Equitas Small Finance Bank's shareholding pattern indicates growing institutional confidence, with mutual fund holdings increasing to 45.20%. This suggests a positive outlook from institutional investors regarding the bank's recovery prospects.

Overall, the results reflect a mixed picture for Equitas Small Finance Bank. While the return to profitability and improved asset quality are encouraging, the ongoing margin compression and elevated cost structure present significant challenges. The company saw an adjustment in its evaluation, reflecting the market's response to these results and the broader operational trends.