Utkarsh Small Finance Bank (UTKARSHBNK) Q2 25/26 earnings summary

Executive summary

• The period was marked by regulatory changes, legacy stress, and significant market disruptions in microfinance, resulting in a net loss and a strategic shift toward portfolio resilience and operational discipline.

• Gross loan book contracted 2.3% year-on-year, mainly due to a sharp contraction in the JLG portfolio, while non-JLG lending grew over 30%.

• Deposits increased 10% year-on-year, with strong growth in retail term and CASA deposits.

• Cost to income ratio deteriorated to 91.1% in Q2 FY26 from 56.1% in Q2 FY25.

• Appointment of new Head-Micro Banking and grant of substantial employee stock options to strengthen leadership and incentivize staff.

Financial highlights

• Net loss for Q2 FY26 was ₹34,846.47 lakh, with H1 FY26 net loss at ₹58,800 lakh, mainly due to legacy stress, elevated credit costs, and higher provisions.

• Net interest income fell 34% year-over-year in H1 FY26 to ₹752 crore; operating profit for H1 FY26 was ₹88 crore, with a Q2 FY26 operating loss.

• Disbursement yields improved across MSME, Micro-LAP, and housing loans.

• Surplus liquidity of ₹4,400 crore and LCR ratio of 224% maintained.

• Rights issue raised ₹950 crore in November 2025, increasing paid-up capital.

Outlook and guidance

• Strategic focus on increasing secured loan share, reducing exposure to high-risk geographies, and expanding retail deposits.

• Loan book growth targeted at 25–30% CAGR over the next 2–3 years, with secured lending to exceed 50% of the portfolio and ROE of 15%.

• Asset quality expected to improve from Q3 FY26, with net NPA levels to decline quarter-on-quarter.

• Continued investment in technology, risk management, and digital offerings to drive operational efficiency.