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ESAF Small Finance Bank's Q3 FY26 earnings call highlighted a significant turnaround. The bank returned to profitability with a PAT of INR 7 crores, driven by improved asset quality. Gross NPA declined to 5.6% and Net NPA to 2.7%, while slippages sharply reduced.
Total business grew 10% YoY to INR 44,686 crores, with gross advances up 13% and deposits up 7%. Disbursements soared 134% YoY. Net Interest Income (NII) increased to INR 432 crores, pushing Net Interest Margin (NIM) to 6.6%.
Management emphasized the MARG strategy (MSME, Agri, Retail, Gold) shifting to secured lending, which now constitutes 63% of gross advances (target 70% by March 2027). Gold loans saw 89% YoY growth. The microfinance portfolio is stabilizing, and the bank expects credit costs to normalize to 2-3% by Q1 FY27, targeting a steady-state ROA of 1.5-2% by FY28. Loan growth for FY27 is projected at 25%.
This quarter marks an inflection point, with management confident in continued quarter-on-quarter improvement and sustainable growth.