Buy Utkarsh Small Finance Bank; target of Rs 26: ICICI Securities

ICICI Securities research report on Utkarsh Small Finance Bank

Utkarsh SFB (Utkarsh) is embarking on a journey to deliver 25% credit growth with 50% share of secured products and RoE of ~15% over the next 2–3 years driven by NIM expansion to 8.5% and credit cost at ~2%. While we note that a structural shift in its loan portfolio (towards secured loans) would have implication on NIM, we believe a greater share of the secured portfolio would bring stability and sustainability to P&L in the long run. We note that an elevated stress pool (MFI GNPL at 23%) would keep credit cost higher in near term. X-bucket CE at >99% in Nov’25 indicates subsiding stress in MFI segment.

Outlook

With likely improvement in return ratios from Q4FY26E, we resume coverage with BUY and a TP of INR 26, valuing the stock at 1.25x on Sep’27E BVPS.