Motilal Oswal's research report on Equitas Small Finance Bank
Equitas SFB (EQUITASB) reported 2QFY26 PAT at ~INR241m (87% YoY, miss to our estimate) vs. loss of INR2.2b in 1QFY26, owing to higher-than expected provisions. During 2QFY26, the bank sold its NPA assets amounting to INR2.16b to an ARC. NII declined 3.6% YoY (down 2% QoQ) to INR7.7b (4% beat). NIM contracted 26bp QoQ to 6.29% due to the cascading effect of portfolio rundown in MFI. Advances grew 4.6% QoQ/7% YoY. MFI portfolio declined 4% QoQ, which now stands at 8.7% of the portfolio. Meanwhile, deposits grew 11% YoY/flat QoQ. CASA ratio improved 148bp QoQ to 30.9%.
Outlook
We fine-tune our earnings estimates and estimate RoA/RoE of 1.0%/10.5% by FY27E. Reiterate BUY with a TP of INR70 (1.3x FY27E ABV).
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