AU Small Finance Bank vs Equitas Small Finance Bank (2026): Growth, NPAs, NIM & Which Is Better?

AU Bank vs Equitas SFB: Q1 FY2027 scoreboard

AU has effectively outgrown the traditional small-finance-bank template

AU ended June 2026 with a balance sheet of approximately ₹1.97 lakh crore.

Deposits reached ₹1.58 lakh crore.

Gross loan portfolio reached ₹1.44 lakh crore.

The bank has spent years expanding beyond its Rajasthan vehicle-finance roots into mortgages, commercial banking, gold loans, credit cards and a nationwide deposit franchise.

More than 90% of the loan portfolio is secured at the broader franchise level.

This matters because small finance banks historically carried higher unsecured and microfinance concentration than universal private banks.

AU's Q1 earnings were driven by more than simple loan growth

NII increased approximately 32% even though the gross loan portfolio grew 23%.

NIM expanded about 47 basis points year on year to 5.9%.

Provisions fell roughly 30%.

PAT consequently increased 37% to ₹796 crore.

That is a particularly healthy earnings combination: balance-sheet growth, margin expansion and lower credit costs occurring in the same quarter.

AU's deposit franchise is keeping pace with credit

Deposits increased 24% year on year, slightly faster than the 23% growth in gross loan portfolio.

That is one of AU's strongest Q1 numbers.

Many fast-growing banks eventually hit a funding bottleneck because loans grow far faster than deposits.

AU avoided that in the current quarter.

Its CASA deposits increased approximately 22%, and the CASA ratio remained around 29%.

The bank's adjusted credit-deposit ratio, excluding certain development-finance refinance, was approximately 80%.

Equitas has the exact opposite balance-sheet tension

Gross advances grew approximately 27%, while deposits increased only about 10%.

Advances reached roughly ₹47,641 crore.

Deposits reached approximately ₹48,976 crore.

The provisional credit-deposit ratio was therefore around 93%.

This is not immediately dangerous, but it reduces funding headroom.

Equitas needs deposit growth to accelerate if 20%-plus loan growth is to remain sustainable without increasing wholesale funding dependence.

Equitas's Q1 profit is more important than its absolute size

The bank returned to a ₹184 crore quarterly profit after losing ₹224 crore in Q1 FY2026.

ROA recovered to approximately 1.18%.

ROE recovered to around 11.76%.

Operating profit before provisions increased roughly 29% year on year.

Credit cost fell dramatically from the stressed previous-year period.

This is a genuine earnings recovery rather than merely a loan-growth story.

Equitas is still much more diversified than it was historically

The non-microfinance book grew approximately 22% year on year.

Small Business Loans remain the flagship franchise.

Housing finance grew around 24%.

Micro and small enterprise lending increased roughly 28%.

Gold loans grew rapidly from a smaller base.

Used car and commercial-vehicle finance also delivered double-digit growth.

The broader portfolio is therefore not returning to a pure microfinance model.

AU is doing the reverse: secured businesses are doing most of the growth work

AU's secured retail and commercial businesses grew approximately 25% year on year.

Unsecured businesses including microfinance, credit cards and personal loans grew only around 11%.

Retail secured assets remain the largest part of the portfolio.

Commercial banking has also become a major growth driver.

This mix is one reason AU can produce a lower credit cost despite operating in many higher-yield customer segments.

AU's microfinance risk is also increasingly protected

Approximately 96% of AU's MFI book was covered under the CGFMU guarantee mechanism at June 2026.

The guarantee changes the loss economics of the portfolio.

It does not eliminate operational risk, fraud risk or collection complexity.

But it can meaningfully reduce the amount of economic loss retained by the bank during a stressed credit cycle.

AU's management has therefore recalibrated how it thinks about normalised MFI credit cost.

Equitas's NIM is exceptionally high

Q1 FY2027 NIM was approximately 7.24%.

AU's was 5.9%.

A 134-basis-point advantage looks extremely attractive.

But the margin reflects Equitas's lending mix, including small-business, microfinance and other high-yielding products.

Those products also require larger branch and collection networks and carry higher credit costs.

That is why Equitas's ROA remains below AU despite the wider NIM.

The expense burden is Equitas's main structural challenge

Equitas's cost-to-income ratio was approximately 68.4% in Q1 FY2027.

Operating expenses increased about 16% year on year.

The bank has an extensive branch and field workforce because small-business, vehicle and microfinance customers require more physical servicing than prime digital borrowers.

To move ROA materially above 1.2%, Equitas needs revenue to grow faster than operating cost while preserving current asset quality.

AU also carries significant operating costs, but its scale absorbs them better

AU's operating expenses increased about 26% as it expanded distribution, technology and manpower.

That looks high.

Yet the bank still produced 1.7% ROA because NII growth and lower provisions offset the expense increase.

The key test is whether operating leverage improves as the expanded branch and technology base matures.

Asset quality produces a split verdict

AU has the lower gross NPA. Equitas has the slightly lower net NPA.

AU GNPA was approximately 2.10% and NNPA 0.76%.

Equitas GNPA was approximately 2.36% and NNPA 0.70%.

The difference in NNPA is only six basis points.

AU's gross-NPA advantage is more meaningful because fewer assets are classified as non-performing before provisions.

Both banks have substantially improved from the previous microfinance stress period

AU's GNPA declined from 2.47% a year earlier to 2.10%.

NNPA declined from 0.88% to 0.76%.

Slippages fell 22% year on year.

Equitas improved GNPA sequentially from 2.49% to 2.36% and delivered a massive decline in credit costs relative to the stressed previous-year quarter.

The direction of travel is therefore positive at both banks.

AU's credit cost is currently much easier to absorb

AU reported annualised credit cost including CGFMU premium of approximately 0.8% of average total assets.

That improved from 1.4% a year earlier.

Equitas reported credit cost around 1.37% of average gross advances.

The definitions are not identical, so the percentages should not be mechanically subtracted.

But the underlying message is clear: AU currently has a lower stress burden relative to its earnings capacity.

ROA is one of AU's strongest advantages

AU generated approximately 1.7% ROA versus Equitas at 1.18%.

For banks, a 50-basis-point ROA gap is large.

It compounds across every rupee of the balance sheet.

AU has also stated an ambition to move ROA closer to 1.8% as operating leverage and credit-cost normalisation continue.

Equitas is targeting a recovery around the low-1%-plus range before seeking further improvement.

ROE shows the same quality gap

AU's ROE was approximately 15.6%.

Equitas reported 11.76%.

AU therefore generates materially more profit for each rupee of shareholder capital.

Equitas's current ROE is still a major improvement from the loss-making previous-year quarter.

Its rerating opportunity depends on showing that 11%-plus ROE is a floor rather than the destination.

Capital adequacy is strong at both banks

Equitas reported CRAR of approximately 19.44%, slightly above AU's 18.9%.

AU has the higher Tier-I ratio, approximately 17.1% versus Equitas at 16.01%.

Both have enough current capital to support growth.

For AU, the larger absolute equity base also provides more flexibility as the bank moves toward universal-bank scale.

AU's universal-bank ambition changes the long-term comparison

AU is increasingly being valued less like a niche SFB and more like an emerging mainstream private bank.

Its deposit base exceeds ₹1.5 lakh crore.

Its loan book is approaching the scale of several older private-sector banks.

The business is diversifying geographically and by product.

If AU eventually transitions to a universal-bank framework, the potential customer, product and funding universe broadens further.

That possibility is part of the reason investors award AU a premium valuation.

Equitas has a different long-term advantage: enormous room to scale from a small base

Equitas's market capitalisation is only around ₹9,100 crore.

Its deposits are below ₹50,000 crore.

Its advances are below ₹50,000 crore.

A much smaller starting point means successful execution can produce high percentage growth for longer.

The trade-off is that small banks have less room for mistakes in funding, asset quality and operating costs.

Why AU can justify a premium P/B

A bank deserves a premium to book if it can sustainably generate a premium ROE with controlled credit risk.

AU currently earns around 15.6% ROE.

Deposits are growing faster than loans.

Credit costs have normalised.

The secured book dominates.

That supports a premium.

The question is not whether AU deserves to trade above Equitas, but whether a roughly 3.7x book valuation leaves enough room for future returns.

Why Equitas's 1.4x book valuation can rerate

If Equitas can sustain 20%-plus non-MFI loan growth while restoring ROA toward 1.5% and ROE toward the mid-teens, today's book multiple could look conservative.

The bank already has a 7.24% NIM.

Its immediate problems are operating cost, deposit growth and credit cost rather than insufficient asset yield.

That makes Equitas a classic operating-efficiency rerating case.

The current stock charts show strong rerating in both banks

AU is trading very close to its 52-week high with RSI around 70.

Equitas has also risen more than 40% over one year but remains further below its high.

Both have already benefited from improving sentiment around small-finance-bank asset quality.

AU Small Finance Bank: what the premium buys

Equitas Small Finance Bank: what the recovery case requires

AU Bank vs Equitas SFB FAQs

Which bank is bigger?

AU Small Finance Bank by a wide margin, with approximately ₹1.44 lakh crore of gross loans versus Equitas around ₹47,641 crore.

Which has higher NIM?

Equitas at approximately 7.24%, compared with AU at about 5.9%.

Which has better ROA?

AU, at approximately 1.7% versus Equitas at 1.18%.

Which has better ROE?

AU, at approximately 15.6% versus Equitas at 11.76%.

Which has lower GNPA?

AU, at 2.10% versus Equitas at approximately 2.36%.

Which has lower NNPA?

Equitas slightly, at around 0.70% versus AU at 0.76%.

Which is cheaper on book value?

Equitas by a wide margin, at roughly 1.4x June net worth versus AU around 3.7x.

What is Equitas's biggest current risk?

Its loan book is growing much faster than deposits while the microfinance and micro-loan portfolio is also expanding rapidly.

Research sources

• Bull Run current market, ownership and technical data
• AU Small Finance Bank official investor disclosures and Q1 FY2027 results
• AU Small Finance Bank official Q1 FY2027 press release
• Equitas Small Finance Bank investor relations
• NSE corporate filings for Equitas Small Finance Bank