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    Jana Small Finance Bank Q1 FY26 earnings call

    JSFBMixed
    Financial Services·22 Jul 2025
    Management Summary

    Jana Small Finance Bank reported a challenging Q1 FY26, primarily due to continued MFI stress, which led to a 2.5% drop in the unsecured book and necessitated higher accelerated provisions of ₹150 crores, resulting in a PAT of ₹102 crores. Despite this, the secured asset portfolio performed strongly, growing 3% in Q1 and targeting 35-40% for the year, with a strategic shift towards 80% secured business. The bank is focused on improving asset quality, with expectations of NPA reduction in Q2 and a significant drop in Q3, alongside efforts to boost CASA growth and optimize cost of funds.

    Highlights

    8

    • PAT for Q1 FY26 stood at ₹102 crores, after an accelerated provision of ₹150 crores.

    • Gross NPA was 2.8% and Net NPA was 0.9% for the quarter, with secured PCR at 69.1% and unsecured at 89.7%.

    • Secured advances grew 3% QoQ in Q1 FY26, targeting 35%-40% growth for the full year.

    • The unsecured book declined by 2.5% QoQ, with 36% of the portfolio under guarantee programs, aiming for 45%-50% by end of Q2 FY26.

    • Customer yield remained steady at 16.5%, but NIM declined to 6.9% from 7.4% QoQ due to investment book sales.

    • The bank plans to open 70 new branches this year (30 new, 40 relocations) and targets 20% deposit growth.

    • CASA growth is targeted at least 25% for the year, with double-digit growth expected in H1 FY26.

    • LCR improved to 171% from ~250% last year, and cost of deposits reduced to 7.75% from 8.25%.

    Concerns

    1

    • MFI stress continuing longer than anticipated

    What Changed1

    vs Q2 FY26

    Guidance items17 → 22 (+5)

    Key financials

    Single quarter

    16 metrics
    1. 01PAT₹102 Cr
    2. 02Gross NPA2.8%
    3. 03Net NPA90%
    4. 04Secured PCR69.1%
    5. 05Unsecured PCR89.7%

    Guidance & targets

    21
    CategoryTargetPriority
    Credit Growth
    Secured Assets Growth
    35%-40%
    		High
    Credit Growth
    Secured Advances Growth
    12%-13% minimum
    		High
    Credit Growth
    MSME Loans Growth
    10%-12%
    		High
    Credit Growth
    Unsecured Advances Growth
    at least 0%
    		Medium
    Credit Growth
    Asset Growth
    20%
    		High
    Credit Growth
    BC Book Growth
    some growth
    		Medium
    Branch Expansion
    New Branches
    70
    		High
    Deposit Growth
    Deposit Growth
    20%
    		High
    CASA Ratio
    CASA Growth
    20%
    		High
    CASA Ratio
    CASA Growth
    at least 25%
    		High
    Asset Mix
    Secured Business Percentage
    72%-73% range
    		High
    Asset Mix
    Secured Book Percentage
    80%
    		High
    Asset Mix
    Unsecured Book Percentage
    20%
    		High
    Asset Quality
    Unsecured Book under Guarantee Program
    45%-50%
    		High
    Asset Quality
    NPA (unsecured)
    getting lower
    		High
    Asset Quality
    NPA (unsecured)
    significant drop
    		High
    Asset Quality
    Slippages
    slow down
    		High
    Cost of Funds
    Cost of Deposit Pricing
    positively impacted
    		High
    Profitability
    NIM
    cross 7%
    		Medium
    Profitability
    NIM
    7.2%-7.3%
    		High
    Profitability
    NIM
    7.8%
    		Medium

    Risks & concerns

    4
    RiskSeverity

    MFI stress continuing longer than anticipated

    Management stated, 'It has been a tough quarter because what we did think originally that the MFI stress was a bump in a hole, unfortunately, the bump was followed by a pothole.' — Management acknowledged

    high

    Negative growth in unsecured book

    The unsecured book dropped by 2.5% this quarter, leading to revenue shortfall. — Management acknowledged

    medium

    Marginal increase in NPA in Q1

    While fresh flows to NPA picked up in Q4 FY25, there was a marginal increase in Q1 FY26. — Management acknowledged

    medium

    Impact of tight credit criteria on growth

    Our criterias are extremely tight of onboarding. So that is one of the reasons we are not able to grow faster. — Management acknowledged

    medium

    Q&A highlights

    3

    “So Manish, fortunately for us, our unsecured book is only 30%. So if you are comparing the green shoots of somebody who is probably 100% MFI, it could be different. Because at the end of the day, our customer yield is at 16.5%, that hasn't changed.”

    Directly addresses investor concern about the bank's performance lagging peers and clarifies the impact of the MFI book size on overall metrics.

    asked by Manish Ostwal

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview and MFI Stress Impact

    Jana Small Finance Bank reported a PAT of ₹102 crores for Q1 FY26, following an accelerated provision of ₹150 crores. The quarter was described as 'tough' due to the prolonged MFI stress, which caused the unsecured book to decline by 2.5% QoQ. Despite this, the bank's customer yield remained stable at 16.5%, though NIM saw a reduction to 6.9% from 7.4% in the previous quarter, partly attributed to the sale of higher-yielding investment books.

    02

    Asset Quality Management and Outlook

    The bank maintained a Gross NPA of 2.8% and Net NPA of 0.9% in Q1 FY26, supported by a secured PCR of 69.1% and unsecured PCR of 89.7%. Management acknowledged a marginal increase in fresh flows to NPA but expressed confidence in future improvements. They anticipate a reduction in unsecured NPA in Q2 and a significant drop in Q3, with slippages expected to slow down by Q2, indicating a gradual recovery in asset quality.

    03

    Strategic Focus on Secured Business Growth

    The secured asset portfolio demonstrated robust performance, growing 3% QoQ in Q1 FY26. The bank is strategically shifting its portfolio mix, targeting a 35%-40% growth in secured assets for the full year and expecting 12%-13% growth in the first half. The goal is to increase the secured business to 80% of the total book, up from the current 71%, which is projected to reach 72%-73% by the end of the first half, emphasizing a safer and more sustainable business model.

    04

    Deposit Franchise Strengthening and Cost Optimization

    Jana Small Finance Bank is actively working to strengthen its deposit franchise, targeting a 20% overall deposit growth for FY26. A key focus is on improving the CASA ratio, with a target of at least 25% growth for the year and double-digit growth expected in H1 FY26. The bank has also reduced its cost of deposits, with rates cut from 8.25% to 7.75%, anticipating a positive impact on cost of deposit pricing from Q2 onwards, further supported by an LCR of 171%.

    05

    Branch Network Expansion and Digital Innovation

    The bank plans a significant expansion of its physical footprint by opening 70 new branches in FY26, comprising 30 new locations and 40 relocations, to broaden its customer reach. Concurrently, digital initiatives are being prioritized, exemplified by the launch of 'iVanii', a digital soundbox solution for merchants and traders. This innovation allows mobile phones to function as soundboxes at zero cost, reflecting the bank's commitment to digital adoption and customer convenience.

    06

    Universal Bank Application and Future Profitability Outlook

    The application for a Universal Bank license, filed on June 9th, 2025, is considered a crucial step for the bank's long-term growth and diversification. Despite the current NIM of 6.9%, management projects it to cross 7% in Q2 and stabilize around 7.2%-7.3% for FY26. They also indicated that NIM could return to 7.8% if the unsecured book grows by ₹1,000 crores, signaling confidence in future profitability driven by strategic growth and asset quality improvements.

    This is an AI-generated summary of a publicly available earnings call transcript.