This small finance bank shares rallied nearly 70% in three months; here's why

AU Small Finance Bank shares are in focus on Thursday as they traded near their record high levels last touched in January 2024. The shares are trading at a 52-week high level of ₹808 apiece on the NSE on Thursday, a tad lower than their record high level of ₹813. The shares rallied nearly 68% from the 52-week low touched in March 2025. The shares since then have seen one side rally with some consolidation in May & June.

Robust Q4 & FY25 profits

The small finance bank reported a strong set of numbers in Q4FY25 as the net profit for the quarter jumped 36% YoY to ₹504 crore as compared to ₹371 crore in the previous year's similar quarter. Similarly, for FY25, the net profit for the bank jumped 37% YoY to ₹2,106 crore as compared to ₹1,535 crore in FY24. This was primarily led by a sharp improvement in the net-interest income by 55% YoY in FY25 and 57% for Q4FY25. Apart from that other income component also jumped 49% YoY to ₹2,526 crore.

Improvement in asset quality

Bank asset quality improved on multiple fronts, especially in the small banking and microfinance space. The GNPA for the quarter stood at 2.28% as compared to 2.31% in the previous quarter. However, the SMA book stood at 3.7% as compared to 4.4% in the previous year’s similar quarter. Similarly, the net NPA for the quartet also improved from 0.91% to 0.74%.

Robust Asset & Liabilities growth

The asset and liabilities portfolio of the bank remained strong throughout the FY25 as the total deposits grew to ₹1,24,269 crore vs ₹97,704 crore. The total CASA deposits grew by 15% YoY to ₹36,353 crore as compared to ₹31,253 crore. Similarly, the advances growth outpaced the industry averages as the total gross advances as of FY25 grew by 20% YoY to ₹ 1,15,704 crore. The asset-liability ratio also stood comfortably at 93%, giving headroom for further growth. The secured retail+commercial loan book grew by 20% YoY, and the unsecured portfolio was reduced by 17% YoY due to tighter regulations in the MFI space.

Strong buying by domestic institutional investors

The overall shareholding pattern as of 31st March 2025 suggests that the domestic institutions like AMCs and mutual funds increased their stake in the company substantially in the Q4FY25. The DII ownership in the company now stands at 27.1% as compared to 21.7% in the December 2024 quarter and 18% in June 2024. This highlights the increasing confidence in the bank’s performance by institutional investors. Apart from the DII, FIIs reduced their stake from 39.3% in Q3FY25 to 35.58% in Q4FY25. While the retail ownership in the bank declined marginally from 15.9% to 14.3% in the same period.

Maintained strong guidance for FY27

The bank guided for a sharp improvement in asset portfolio, with 72-75% of the portfolio coming from high RoA assets. In addition, the bank also aims to make 65% of the branches profitable as compared to 49% in FY25. Along with above clear guidance, the bank also aims to further improve the asset quality with stringent checks in MFI space.