Equitas Small Finance Bank reported a profit after tax of INR 1.8 billion for the first quarter of fiscal 2027, beating market expectations by 16%. The strong performance was driven by healthy growth in net advances and efficient management of provisioning costs, even as the bank's CASA ratio experienced a slight moderation.
Equitas Small Finance Bank posted a profit after tax of INR 1.8 billion for the April-June quarter of the 2027 fiscal year. This figure outperformed market expectations by 16%, supported by a combination of robust other income and controlled expenses related to loan provisions, which is the money set aside to cover potential losses from unpaid loans.
The bank’s net interest income, which is the difference between interest earned on loans and interest paid on deposits, climbed to INR 10.3 billion. This reflects a year-on-year increase of 31% and a sequential growth of 5%. While the growth in income was strong, the net interest margin—a measure of profitability from interest—saw a minor compression of 12 basis points to 7.24%. This dip was largely due to a rise in the cost of funds, which climbed to 7.05% during the quarter.
Asset and Deposit Trends
Equitas SFB continued to expand its loan portfolio, with net advances reaching INR 447 billion. This represents a solid 28.8% growth compared to the same period last year. The microfinance division remained a key contributor to this expansion, growing 4.6% sequentially. Meanwhile, total customer deposits saw a steady rise of 10.4% year-on-year and 5.2% quarter-on-quarter.
However, the bank's current account savings account (CASA) ratio, which reflects the proportion of deposits held in low-interest-bearing accounts, moderated to 25.1%. This was a decrease of 108 basis points from the previous quarter. For investors, the CASA ratio is a common monitorable as it indicates the bank's ability to source low-cost capital for lending.
Financial Projections and Brokerage Views
Following these results, Motilal Oswal has maintained its positive stance on the stock. The brokerage has revised its earnings projections upward, anticipating a 10% increase for FY27 and 7% for FY28. Their analysis projects the bank to reach a return on assets of 1.2% and a return on equity of 12.2% by the end of fiscal 2027.
As the bank moves through the fiscal year, investors will likely track whether it can manage its cost of funds effectively and improve its CASA ratio. Additionally, the bank's ability to maintain high growth in net advances while keeping credit quality stable within its microfinance and other lending segments will be important factors to watch in upcoming quarterly reports.