Utkarsh Small Finance Bank (UTKARSHBNK) Q3 25/26 earnings summary

Executive summary

• Q3 FY26 marked by recalibration, resilience, and cautious optimism amid regulatory changes, with a net loss of ₹37,501.76 lakh for the quarter and ₹96,296.28 lakh for nine months, compared to a profit in the prior year period.

• Strategic focus on stability, quality, and resilience over short-term growth, reflected in a 16% contraction of the JLG portfolio and a 3.9% year-on-year reduction in the gross loan book.

• Strong growth in microbanking business loans (MBBL), up 80% year-on-year and 38% quarter-on-quarter, now 19% of the microbanking loan book.

• Non-JLG lending, including MSME, housing, and business banking, grew 28% year-on-year, with robust expansion in secured asset classes.

• Asset quality initiatives and operational discipline led to improved collection efficiency, but asset quality deteriorated due to microfinance disruptions.

Financial highlights

• Net loss of ₹37,501.76 lakh for the quarter and ₹96,296.28 lakh for nine months, mainly due to elevated credit costs and legacy stress.

• Gross loan portfolio declined 3.9% year-on-year to ₹18,306 crore; non-JLG loans grew 27.5% year-on-year, while JLG loans fell 34.1% year-on-year.

• Total deposits grew 5% year-on-year to ₹21,087 crore, with retail term deposits up 24% and CASA deposits up 16% year-on-year.

• CASA plus retail term deposit (RTD) ratio improved to 82% as of December 2025, up from 70% a year ago.

• Cost-to-income ratio surged to 110.3% for Q3 FY26; surplus liquidity of ₹4,700 crore and LCR ratio of 207% as of December 2025.

Outlook and guidance

• Targeting 25%-30% loan book growth over the next 2-3 years, with secured lending to comprise over 50%.

• NIM expected around 8.5% and ROE of 15% by FY 2028; FY 2027 ROE guidance at 10%.

• Credit cost guidance: 3%-3.5% for FY 2027, declining to 2.5% by FY 2028.

• Cost-to-income ratio expected to decline from 110% to 57% by FY 2028, with no new branches planned.

• Board approved draft scheme of amalgamation with Utkarsh Core Invest Limited, pending NCLT approval.