AU Small Finance Bank’s share price has declined as much as 7.5% to an intra-day low of Rs 735.20 on the National Stock Exchange. The sharp correction in the lender’s stock price came after it reported its quarterly earnings for the first quarter of FY26. The delayed recovery in the MFI space is one of the big worries. Here is what different brokerage houses said on the private lender post-earnings.
Nuvama on AU Small Finance Bank: MFI recovery delay a worry
Nuvama Institutional Equities retained its ‘Reduce’ rating on AU Small Finance Bank. However, the brokerage raised the target price to Rs 650, compared to Rs 530.
The brokerage said AU Small Finance Bank announced a soft quarter in Q1FY26 with a miss on Net Interest Margin (NIM) and higher-than-expected delinquencies driven by south-based mortgages and a delayed recovery in Microfinance Institutions (MFI).
“After cutting credit cost guidance to 85 bps in Q4FY25, the bank increased it to 1% due to deterioration in MFI/south-based mortgages. NIM shall fall in Q2 as well with the full impact of the 75 bps repo rate cut,” said Nuvama in a research note.
Emkay Global on AU Small Finance Bank: Asset quality concerns
Emkay Global, a domestic brokerage house, maintained its ‘Reduce’ call on the stock, with a target price of Rs 725, implying a downside of 8.8%.
The bank expects the margin to remain soft in the second quarter. However, to improve thereafter. The lender has also revised its credit cost guidance for FY26 by 10 bps to 1% of average assets due to persistent stress in the MFI portfolio, while refraining from providing FY26 RoA guidance, citing macro and asset quality uncertainties.
Emkay trimmed FY26-27 earnings by 2-3%, given higher valuations (that is 2.6x FY27 ABV) amid a weak core performance and persistent asset quality stress.
Emkay said AU Small Finance Bank reported weak core performance, with margins declining sharply by 40 bps QoQ to 5.4%, although higher treasury gains and surprisingly lower nonstaff opex, amid bidding for a Universal Banking license, led to a 6% net profit beat.
AU Small Finance Bank stock performance
The share price of AU Small Finance Bank has fallen 7.5% in the last five trading sessions. The stock has declined by 5.7% in the past one month. However, the stock has raised investors’ wealth by 24% in the last six months and 15% in the past one year.