AU Small Finance Bank Gets Yes Securities 'Neutral' Post Q1 Result; Says Current Valuations Caps Upside

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Yes Securities Report

Our earnings estimates for AU Small Finance Bank Ltd. have been cut by 3-7% for FY26/27 on lowering of growth and mild increase in credit cost expectations. Key monitorables for next couple of quarters will be

1. delinquency trends in MFI, Cards and Mortgage portfolios,

2. distribution-led growth push in wheels, mortgages and gold portfolios,

3. trends in MFI disbursements and acquisitions in cards,

4. decline in CoF and further rate actions and

5. incremental room to manage Opex growth.

RoE will likely recover over FY27/28 aided by stronger growth, margin, and credit cost trends.

Valuation at 2.7x PBV and 18x P/E on FY27 estimates leaves little room for upside. Move rating to Neutral.

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