Equitas Small Finance Bank Q2 Profit Rises 53% to Rs 858 Crore

Equitas Small Finance Bank net profit stood at Rs 858 crore for Q2FY27, up 52.9% YoY.
Net Interest Income reached Rs 2,820 crore, reflecting a 31.5% YoY growth.

Reader Takeaway: Strong deposit and loan growth drive profitability, though rising competitive intensity in affordable housing remains a pressure point.

What just happened

Equitas Small Finance Bank delivered a strong performance in the second quarter of FY27. Net profit grew by 7.8% sequentially to Rs 858 crore, while Net Interest Income (NII) improved by 4.6% QoQ to Rs 2,820 crore. Asset quality showed improvement as credit costs dropped to 99 bps from 107 bps in the previous quarter, aided by the normalization of the unsecured loan portfolio.

Why this matters

Deposit growth continues to be a highlight, rising 29% YoY and 8% QoQ, with the CASA ratio improving to 29.5%. This provides the bank with a stable funding base. While NIMs saw a minor contraction of 9 bps to 5.8% due to a shift in portfolio mix and day-count conventions, management remains focused on maintaining rangebound margins between 5.6% and 5.8% through FY29.

Business Strategy

The bank reported a 28% YoY growth in total advances, led by the wheels portfolio. Growth in gold loans saw a temporary moderation to 4% QoQ owing to fluctuations in gold prices. Regarding the affordable housing segment, the bank plans to adopt a cautious, long-term approach to manage competitive pressures and funding costs, targeting a growth rate of 20% by FY28.

Risks to watch

Key risks identified by the brokerage include a potential slowdown in overall credit momentum and emerging asset quality challenges within the unsecured lending segment. Additionally, stiff competition in the housing finance space may impact long-term margin expansion.

What to track next

Investors should monitor the bank's ability to maintain its CASA ratio momentum and observe the impact of the normalized unsecured portfolio on credit costs in the coming quarters.