Equitas Small Finance Bank Reports Strong Quarterly Turnaround with Record Earnings

Quarterly Financial Performance: A Definitive Upswing

In the December 2025 quarter, Equitas Small Finance Bank posted its highest quarterly figures across several critical metrics. Net Interest Income (NII) surged to ₹851.63 crores, marking a new peak for the bank and reflecting improved core lending operations. Interest Earned also reached an all-time high of ₹1,691.68 crores, underscoring the bank’s effective asset utilisation and interest rate management.

Profit After Tax (PAT) climbed to ₹90.03 crores, the strongest quarterly profit recorded by the bank to date. This translated into an Earnings Per Share (EPS) of ₹0.79, the highest quarterly EPS in the bank’s recent history. These figures represent a significant turnaround from the previous quarter’s subdued performance and indicate robust operational efficiency and cost control.

Asset Quality and Risk Management Improvements

Equitas Small Finance Bank’s asset quality metrics also showed encouraging signs. The Gross Non-Performing Assets (NPA) ratio declined to a low of 2.75%, while the Net NPA ratio improved to 0.92%, both reflecting enhanced credit risk management and effective recovery efforts. These improvements are critical in maintaining investor trust and ensuring sustainable growth in the bank’s loan book.

Such reductions in NPAs are particularly noteworthy given the challenging macroeconomic environment and the competitive pressures within the small finance banking sector. The bank’s ability to contain asset quality deterioration while expanding its loan portfolio is a positive signal for stakeholders.

Financial Trend Reversal and Market Reaction

The bank’s financial trend score has shifted dramatically from a negative -6 in the previous three months to a positive 13 in the latest quarter, reflecting a clear reversal in performance trajectory. This improvement has been recognised by MarketsMOJO, which upgraded Equitas Small Finance Bank’s Mojo Grade from Hold to Buy on 26 December 2025, with a current Mojo Score of 71.0. The Market Capitalisation Grade remains at 3, indicating a mid-tier market cap classification.

Despite the positive quarterly results, the stock price showed a marginal decline of 0.19% on the day, closing at ₹69.45, slightly below the previous close of ₹69.58. The stock traded within a range of ₹67.77 to ₹71.60 during the session, remaining close to its 52-week high of ₹73.42, and well above its 52-week low of ₹50.05. This price action suggests cautious optimism among investors, balancing the strong fundamentals against broader market volatility.

Non-Operating Income and Profitability Considerations

While the core operating metrics have improved, the bank’s non-operating income remains a point of concern. For the quarter, non-operating income accounted for 254.51% of Profit Before Tax (PBT), indicating a disproportionate reliance on non-core income sources. This could suggest volatility in earnings quality and warrants close monitoring in subsequent quarters to ensure sustainable profitability.

Nonetheless, the strong core earnings performance and improved asset quality provide a solid foundation for the bank’s future growth prospects. The management’s focus on expanding the loan book prudently while maintaining credit discipline appears to be yielding tangible results.

Comparative Returns and Market Positioning

Equitas Small Finance Bank’s stock has delivered mixed returns relative to the broader Sensex index over various time horizons. Over the past one month, the stock surged 13.2%, significantly outperforming the Sensex’s decline of 2.51%. Year-to-date returns stand at 10.31%, again ahead of the Sensex’s negative 3.11% performance.

However, over the one-year period, the bank’s stock returned 3.8%, lagging behind the Sensex’s 7.88% gain. Longer-term returns over three and five years show the stock underperforming the benchmark, with 26.73% versus 39.16% and 75.6% versus 78.38%, respectively. This mixed performance highlights the bank’s evolving market position and the potential for further value creation as it consolidates its operational improvements.

Outlook and Analyst Recommendations

With the recent upgrade to a Buy rating by MarketsMOJO and a Mojo Score of 71.0, Equitas Small Finance Bank is positioned favourably among its peers in the Other Bank sector. The upgrade from Hold reflects confidence in the bank’s ability to sustain revenue growth, improve margins, and maintain asset quality in a competitive environment.

Investors should, however, remain vigilant regarding the elevated non-operating income contribution and monitor quarterly earnings for consistency. The bank’s strategic initiatives to deepen its retail lending franchise and enhance digital capabilities could further bolster its growth trajectory.

Conclusion: A Bank on the Upswing

Equitas Small Finance Bank Ltd’s December 2025 quarterly results mark a significant inflection point in its financial journey. The bank has successfully reversed prior negative trends, delivering record-high NII, interest income, and profitability while improving asset quality metrics. The upgrade to a Buy rating and a strong Mojo Score reflect growing market confidence in the bank’s fundamentals and growth prospects.

While certain areas such as non-operating income require ongoing scrutiny, the overall financial trend is decidedly positive. Investors seeking exposure to the small finance banking sector may find Equitas Small Finance Bank an attractive proposition, given its improving earnings quality, prudent risk management, and strategic growth initiatives.

As the bank continues to navigate a dynamic economic landscape, its ability to sustain these improvements will be key to unlocking further shareholder value in the coming quarters.

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