Bajaj Finance may post strong profits in Q2 on moderate provisions and higher credit

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26 Aug, 2025 12:21

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Leading non-banking finance company Bajaj Finance is expected to see a healthy double-digit growth in the second-quarter profit with improved operating profit and a fall in provisions. Festive demand is expected to support growth in assets under management for the company and there could be a decline in credit cost for the quarter. The numbers will be released on October 26.

The stock seems to have started discounting the expected improved growth in the business as it rallied nearly 50 percent in the current financial year, much ahead of equity benchmarks, experts feel. Let's see whether the company can meet the expectations or not.

"Assets under management (AUM) is expected to grow by around 3.4 percent QoQ and 20 percent YoY on the back of strong demand in the festive season. Credit costs are expected to lower due to improved collection efficiencies and buffer provisions which, in turn, are expected to support the uncertain situation," said KRChoksey Research which expects the cost to income to be around 30 percent.

The brokerage expects improved operating profits and lower provisions to impact QoQ (up 56 percent) and YoY (up 62 percent) PAT performance, positively.

Kotak Institutional Equities also penned down credit cost of 3.5 percent, lower than 4.5 percent in Q1FY22 and 4.9 percent in Q2FY21, to reflect gradual improvement in collections post the second wave.

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According to Kotak, Bajaj Finance is expected to report 4.8 percent QoQ increase in AUM in 2QFY22. "Pickup in consumer loan disbursements and strong traction in the housing segment are key drivers. Gradual decline in cost of funds over the past few quarters will drive 15 bps YoY expansion in NIM to 10.2 percent (up 55 bps QoQ)."

Higher business volumes will likely drive rise in cost-to-average AUM ratio to 3.7 percent (up 31 bps YoY), albeit lower than pre-Covid levels of 4.2-4.6 percent, said the brokerage which sees 20 percent YoY growth in net interest income and 52 percent in profit.

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