01 — At a Glance
The Wheels-Driven Lender That Caught an NPA Updraft
- 52-Week High / Low₹1,039 / ₹478
- FY26 YTD Revenue (9M)₹12,616 Cr
- FY26 YTD PAT (9M)₹1,742 Cr
- Q3 EPS₹8.94
- Annualised EPS (Q3×4)₹35.76
- Book Value₹243
- Price to Book3.97x
- Dividend Yield0.10%
- Debt / Equity7.87x
- GNPA / NNPA2.30% / 0.88%
The Auditor’s Sarcastic Note: AU Bank had one of the strongest quarters — margin expansion, credit cost coming down, deposit growth at 23% YoY while peers hiccup, wheels portfolio at ₹43,700 crore crushing it like a gyrating Maruti Swift. Then on February 18, Haryana de-empanelled them over ₹735 crore of government deposits linked to a separate bank’s fraud. Is it a real risk? No. Is the market treating it like AU invented fraud? Yes. Stock down 5.7% in one day. Welcome to India’s banking sector drama.
02 — Introduction
Small Finance Banks: The Sector That Doesn’t Know What It Wants To Be
Let’s set the scene. AU Small Finance Bank entered FY26 with a mission: become India’s new age lending machine focused on the underserved. Retail loans. Vehicle financing. Microfinance. Gold loans. Mortgages. Think of it as a Walmart of banking — everything under one roof, served with an ambition to hit 1.8% ROA by next year.
The results from Q3 FY26 (December 31, 2025) were genuinely impressive. Profit after tax hit ₹668 crore, up 26% YoY (ex-one-time labour code adjustment that dinged Q3 CY24 comparisons). Net Interest Margin expanded 25 basis points QoQ to 5.7%. Deposits grew 23% YoY to ₹1.38 lakh crore. Loan growth at 19% YoY outpaced system growth of 14.4%. The wheels financing portfolio — their crown jewel — crossed ₹43,700 crore, up 27% YoY. Management sounded confident. Analysts upgraded. Stock ran 77% in one year.
Then, on February 18, 2026, Haryana’s state government de-empanelled the bank over ₹735 crore of deposits. Not because AU committed fraud — zero allegations. Not because AU lost the government’s money — all transactions were properly executed. Because some other bank’s employees allegedly siphoned ₹590 crore from Haryana state accounts, and the state decided to de-bank everyone. Guilt by association. Financial markets’ favorite game.
Is it a crisis? Mathematically, no. ₹735 crore is 0.5% of deposits. Deposit mobilization has been strong. The bank’s liability franchise is healthy. But optics matter more than math in 48-hour equity reactions. So we have: best quarter in quarters, followed by a scandal that isn’t theirs, followed by stock volatility and analyst confusion. Banking in India, baby.
Concall Takeaway (Jan 2026): Management claimed deposits had “no major outflows” post-Haryana disclosure. Liquidity coverage ratio remained “comfortable at over 118%”. Essentially, AU is saying: “Trust us, this is noise.” Investors are saying: “We heard that before.” The burden of proof is on AU now.
03 — Business Model: The Retail-First Lender
Wheels, Mortgages, Microfinance, Gold. Everything But Boring.
EduInvesting runs entirely on reader support — ₹360 a year keeps the lights on.
