Upgrades

The company continues to demonstrate strong disbursement traction, while margins should remain resilient supported by declining funding costs, recent pricing actions, and operating leverage from scale.

CreditAccess Grameen (CREDAG) guided ~70–100bp higher credit costs in FY26 and credit costs of 4.0-4.5% in FY27 (including 70–80bp higher provisions from the ECL revision).

We maintain our BUY recommendation on the stock.

With stress in the MFI segment receding and companies strategically shifting towards secured, high-yield assets such as affordable housing and vehicle loans, both advances and deposit growth are expected to get back on track by year-end, with advances projected to grow at 19% YoY. While credit costs are anticipated to decline, the shift in portfolio mix is likely to compress NIMs in the short term, leading to a temporary impact on return metrics. However, by the end of FY27, ROA is projected to improve to approximately ~2%. We upgrade our rating to Accumulate on the stock with a revised...

We maintain our BUY recommendation on the stock

We maintain our BUY recommendation on the stock.

CreditAccess Grameen’s (CREDAG) 1QFY26 PAT stood at INR602m (vs. est. INR842m). NII declined ~2% YoY to ~INR9b (in line). PPOP fell ~8% YoY to INR6.5b (in line).

We maintain our BUY recommendation on the stock.

AU Small Finance Bank (AUBANK) reported a 1QFY26 PAT of INR5.81b (5% beat; up 15% QoQ) amid robust other income and controlled opex.

AU SFB reported weak core performance, with margins declining sharply by 40bps QoQ to 5.4%, although higher treasury gains and surprisingly lower nonstaff opex, amid bidding for a Universal Banking license led to a ~6% PAT beat, at Rs5.8bn/1.5% RoA.

declined by 10 bps compared to FY24, settling at 12.9%. Operating expenses increased by 11.0% YoY to Rs.1,108 cr. in FY25, while a decline in fee and other income led to a marginal rise in the cost-to-income ratio to 30.7%, up from 30.5% in the previous year. Despite a sharp 327.1% YoY increase in provisions due to accelerated write-offs targeting delinquent accounts, the company reported an annual profit of Rs.531.4 cr. Gross NPA and Net NPA rose sharply to 4.8% and 1.7%, respectively, from 1.2% and 0.4% in FY24, reflecting a notable deterioration across all PAR buckets. While collection efficiency remained subdued for the first three quarters of the year, it showed signs of recovery towards the end of FY25, indicating early momentum in asset quality stabilization....

Overall, FY25 has been tough owing to higher interest rates, tight liquidity, and high stress in unsecured loans. Profitability is expected to rebound from H2FY26 as headwinds recede on the margin and asset quality fronts.

CreditAccess Grameen’s (CREDAG) 4QFY25 PAT stood at INR472m (est. INR698m). FY25 PAT declined ~63% YoY to INR5.3b. 4Q NII was flat YoY at ~INR8.8b (in line). PPOP declined ~7% YoY to INR6.3b (~7% miss).

We upgrade our rating to BUY from HOLD earlier.

We maintain our BUY recommendation on the stock.

AU Small Finance Bank (AUBANK) posted a 4QFY25 PAT of INR5.04b (7% beat; -5% QoQ), amid better other income partly offset by higher provisions. NII grew 3.5% QoQ to INR20.9b (in line), while NIM contracted 6bp QoQ to 5.8%, primarily on account of a change in asset mix.

FY25 has been weak for the bank marked by elevated stress in unsecured retail loans resulting in a sharp increase in credit costs, higher interest rates and tight liquidity. Q4 earnings missed estimates led by accelerated provisioning on account of the stress in unsecured loans, yet PCR improved.

We recommend a BUY on the stock with a target price of Rs 49/share, implying an upside of 11% from the CMP.

AU SFB’s profitability, post merger in Apr’24, was impacted due to elevated credit cost on the back of higher-than expected delinquencies in its credit card (CC)/microfinance (MFI) portfolios and NIM compression.