Utkarsh Small Finance Bank (UTKARSHBNK) Q1 25/26 earnings summary

Executive summary

• Q1 FY26 saw a net loss of ₹239 crore compared to a profit of ₹137 crore in Q1 FY25, driven by market disruptions in the microfinance segment, full implementation of Guardrail 2.0, and elevated provisions.

• Overdue buckets and asset quality deteriorated, with gross NPA rising to 11.4% and net NPA to 5.0% as of June 2025, mainly due to JLG portfolio stress.

• Gross loan book grew 2.3% year-on-year to ₹19,224 crore, with a significant shift toward secured lending and non-JLG portfolios growing 39% year-on-year.

• Deposits increased 18.3% year-on-year to ₹21,489 crore, with retail term deposits up 34% and CASA deposits up 22%.

• Strategic focus is on digital enablement, product cross-sell, and operational efficiency to drive future growth.

Financial highlights

• Net loss of ₹239 crore for Q1 FY26, with net interest income down 30% year-on-year to ₹402 crore and operating profit dropping 71% to ₹92 crore.

• Total deposits grew 18% year-on-year, with CASA plus retail term deposit (RTD) ratio improving to 74% from 67% year-on-year.

• MSME loan portfolio expanded 46% year-on-year to ₹4,001 crore; housing loans up 30% to ₹929 crore; CE and CV loans up 17% to ₹1,188 crore.

• Cost-to-income ratio surged to 83.0% from 54.1% in Q1 FY25.

• Disbursement yields improved across MSME and housing portfolios.

Outlook and guidance

• Management expects business stabilization and improved collection efficiency in the next few months, with credit costs to remain elevated in Q2 and normalization anticipated from Q3 onwards.

• Non-JLG loan book is guided to grow 30%+ year-on-year; JLG growth guidance withheld due to ongoing uncertainty.

• Medium-term ROE target of 15%+ and loan growth of 25-30% per annum over the next three years.

• Focus remains on diversifying the asset portfolio, increasing the share of secured loans, and expanding in new geographies.

• Continued investment in technology and digital offerings to improve customer experience and operational efficiency.