Suryoday Small Finance Bank Limited — Q3 FY26 earnings call

Call held 23 Jan 2026

Management summary

Suryoday Small Finance Bank reported strong growth in gross advances and deposits for Q3 FY26, driven by retail and diversified portfolios. While asset quality showed some improvement in collections, GNPA remained elevated. Profitability metrics like NII and PBT saw a decline, and the cost-to-income ratio increased. Management outlined targets for improved efficiency and asset quality in the coming quarters, leveraging CGFMU claims and digital initiatives.

Highlights

  • Gross advances reached ₹11,885 crores, registering a healthy Y-o-Y growth of 24.3%.

  • Disbursements (excluding Supply Chain Finance) for 9M FY26 were ₹6,230 crores, up 30.2% from last year.

  • Deposit base expanded to ₹12,865 crores, reflecting a Y-o-Y growth of 32.5%, with retail deposits improving to 87%.

  • CASA ratio stood at 21.2%, underscoring improving deposit granularity and franchise depth.

  • Capital adequacy ratio remained strong at 21.9%, well above the regulatory requirement of 15%.

Concerns

  • Net interest income decreased from ₹862 crores to ₹782 crores for 9M FY26.

  • Pre-provision operating profit decreased from ₹343 crores to ₹277 crores for 9M FY26.

  • Cost-to-income ratio for 9M FY26 increased to 73.6% from 66.4% in the corresponding period last year.

  • Profit before tax for 9M FY26 stood at ₹102.2 crores versus ₹148.7 crores in the last year.

  • GNPA ratio stood at 6.6% as of Dec'25, with analysts questioning the Q-o-Q increase.

Key financials

  1. Gross Advances ₹11,885 Cr +24.3%YoY
  2. Disbursements (excl. SCF) 9M FY26 ₹6,230 Cr +30.2%YoY
  3. Deposit Base ₹12,865 Cr +32.5%YoY
  4. CASA Ratio 21.2%
  5. GNPA Ratio 6.6%
  6. Net Total Income 9M FY26 ₹1,052 Cr +3.2%YoY
  7. Net Total Income Q3 FY26 ₹358 Cr +16.2%YoY
  8. Net Interest Income 9M FY26 ₹782 Cr -9.3%YoY
  9. Pre-provision Operating Profit 9M FY26 ₹277 Cr -19.3%YoY
  10. Cost-to-income Ratio 9M FY26 73.6% +10.8%YoY
  11. Profit Before Tax 9M FY26 ₹102.2 Cr -31.4%YoY
  12. Capital Adequacy Ratio 21.9%
  13. PSLC Income Q3 FY26 ₹6 Cr -40%QoQ
  14. Credit Cost Q3 FY26 ₹41 Cr +2.5%QoQ
  15. Gross Slippages Q3 FY26 ₹155 Cr
  16. NNPA Receivable under CGFMU ₹467 Cr

What they filed

Q1 FY27: revenue up 25.7%, net profit up 114.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue507 488 471 495 520 +3%544 +11%602 +28%622 +26%
Net profit45 33 -34 35 30 −33%37 +12%50 +247%75 +114%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Profitability

  • Cost-to-income ratio Profitability · FY27 · High confidence Below 65%
    So, I think, the first port of call for us will be that in the next financial year, we are able to come well below the 65% mark because we would have by Q1 cleared up our non-paying book in the portfolio.

    — Kanishka Chaudhary

  • Net Interest Margin (NIM) Profitability · Next couple of quarters · High confidence 7.5% to 8%
    So, I think from where we stand today, we expect the NIMs to be around 7.5% to 8%.

    — Kanishka Chaudhary

  • Return on Equity (ROE) Profitability · Q4 FY26 · High confidence Closer to 10%
    In terms of ROE, we said that run rate will be closer to around 11% in Q4, 10% above and probably closer to 11%.

    — Baskar B. Ramachandran

  • Return on Assets (ROA) Profitability · Q4 FY26 · High confidence Closer to 1.1%
    I would say that now Q4 as we kind of guided is around closer to 1.1% on the lower end and ROA of around 10 is the first thing that we would like to achieve before we really project for the subsequent quarters.

    — Baskar B. Ramachandran

Asset Quality

  • Steady-state credit cost Asset Quality · Ongoing · High confidence Not more than 1%
    Yes. So, I think with the kind of mix that we have today in our portfolio in the Bank, we would want to have a credit cost of not more than 1%.

    — Kanishka Chaudhary

  • Gross Slippages (Overall Book) Asset Quality · Q4 FY26 · High confidence Below ₹100 crores
    I think you mentioned the target for Q4 slippages is below Rs. 100 crores and this is for the overall book.

    — Kanishka Chaudhary

  • Gross Slippages (MFI) Asset Quality · Q4 FY26 · High confidence ₹75-80 crores
    Yes, so for IF as a whole, it will be around 75 to 80 and around Rs. 20-odd crores or less, little less for the retail asset business.

    — Kanishka Chaudhary

  • Gross Slippages (Retail Asset) Asset Quality · Q4 FY26 · High confidence ₹20 crores or less

    — Kanishka Chaudhary

  • Monthly Slippages Asset Quality · by March · High confidence Less than ₹20 crores
    And hopefully if the trend continues, the target is to have less than Rs. 20 crores, which is used to be what, well, before the entire mini crisis started. So, I think we should be back to 20 and probably a little lesser in the month of March.

    — Kanishka Chaudhary

  • MFI Collection Efficiency (X bucket) Asset Quality · Beginning Jan · High confidence 99.5%
    We have just shared under 99.5 in the X bucket collection, and we are very confident that we will be able to reach the 99.5 target beginning Jan.

    — Kanishka Chaudhary

  • MFI Collection Efficiency (Bucket 0) Asset Quality · Jan, Feb · High confidence 99.5%
    Like we said in the bucket 0 for MFI business, our collection efficiency is around 99.4. So, that is the kind of flow rates we have, and we are quite confident that we will be able to reach 99.5 by Jan, Feb, which means that we will have a flow rate of not more than 0.5%.

    — Kanishka Chaudhary

  • MFI Flow Rate (Bucket 0) Asset Quality · Ongoing · High confidence Not more than 0.5%

    — Kanishka Chaudhary

CGFMU Claims

  • Claim Amount CGFMU Claims · Q1 FY27 · High confidence ₹200-300 crores
    but the largest chunk would be claimed in the Q1, which may be around closer to Rs. 200 crores to Rs. 300 crores.

    — Baskar B. Ramachandran

Portfolio Mix

  • Overall Term Deposit Base (5-year plus) Portfolio Mix · Ongoing · High confidence 20-30%
    our focus is to have at least a 20% to 30% of our overall term deposit base in the range of 5 year plus.

    — Baskar B. Ramachandran

What to watch in Q4 FY26

Cost-to-income ratio

Next financial year (FY27)
Current 73.6% (9M FY26)
Target Below 65% (FY27)

Why it matters

A key efficiency metric, significant improvement is targeted and linked to asset quality resolution.

So, I think, the first port of call for us will be that in the next financial year, we are able to come well below the 65% mark because we would have by Q1 cleared up our non-paying book in the portfolio.

Risks & concerns

  • Elevated GNPA ratio

    medium

    GNPA ratio at 6.6% as of Dec'25, which is higher than industry trends, though largely covered by CGFMU.

    Analyst acknowledged

  • Perception of delayed operational improvement

    medium

    Analysts expressed concern that management's promises of improvement are taking longer to materialize in numbers.

    Analyst acknowledged

  • Slower reduction in cost of funds compared to peers

    low

    Bank's cost of funds reduction is slower due to a conscious strategy of raising longer-tenure deposits for mortgage financing.

    Analyst acknowledged

  • Potential QIP dilution at current valuation

    low

    Analyst concern about QIP diluting shareholders at current price, but management states no intent to raise capital at current valuations as it's not immediately needed.

    Analyst downplayed

Q&A highlights

7 direct
Gross NPA trajectory and CGFMU impact Direct
So, one of the things that we will need to keep in mind is that our entire MFI book is covered under the credit guarantee scheme. So, we don't really look forward to Q-o-Q write-offs. All of these will essentially get squared off at the time of us making a claim.

Clarifies why reported GNPA might differ from industry trends, emphasizing the role of CGFMU in managing asset quality.

Asked by Deepak Poddar

Cost-to-income ratio target Direct
So, I think, the first port of call for us will be that in the next financial year, we are able to come well below the 65% mark because we would have by Q1 cleared up our non-paying book in the portfolio.

Provides a specific numerical target and timeline for a key efficiency metric, linking it to asset quality resolution.

Asked by Deepak Poddar

Steady-state credit cost Direct
Yes. So, I think with the kind of mix that we have today in our portfolio in the Bank, we would want to have a credit cost of not more than 1%.

Sets an important long-term expectation for credit costs, indicating confidence in asset quality management.

Asked by Deepak Poddar

Earnings trajectory compared to peers Direct
As we see it, I think starting Q1 of next year with the entire remaining bad book going out, we will naturally see an uptick in our earnings.

Explains the expected inflection point for earnings growth, linking it to the resolution of the bad book.

Asked by Shailesh

CGFMU claim timeline and recovery mechanism Direct
but the largest chunk would be claimed in the Q1, which may be around closer to Rs. 200 crores to Rs. 300 crores. ... So, three-fourths of the money goes back to the Credit Guarantee fund, and one-fourth of the money is retained by us and is a credit to the P&L.

Provides clarity on the timing and financial impact of CGFMU claims and subsequent recoveries, which is crucial for understanding future P&L.

Asked by Arvind

Slower cost of funds reduction Direct
Consciously, we are focusing that at least a significant, reasonably significant portion of a deposit specifically linked to the mortgage financing will be from higher deposits. So, entire last quarter, we continue to pay a marginally higher rate on the five year consciously.

Explains the strategic rationale behind the bank's cost of funds trajectory, linking it to asset-liability management for mortgage financing.

Asked by Arvind

Management bandwidth and operational execution Partial
I think all of this, now it is time for us as a Bank to put all of this in action in terms of, as we would call it, strategic hidden strength to play out. And fairly confident that with management, substantially in place for the last, not we have kind of recruited in the last one year, it took around three years for a complete alignment.

Addresses a critical analyst concern about the pace of operational improvement and management's ability to execute, with a commitment to future delivery.

Asked by Jaspree

QIP and shareholder dilution Direct
Ideally, there should be an enabling resolution taken on a continuous basis. There is no intent for us to raise money at this current price. Particularly, we don't really require.

Reassures investors about the bank's capital position and clarifies that any QIP would be an enabling provision, not driven by immediate need or at a dilutive price.

Asked by Vatsal

2 min read 6 chapters

Detailed narrative

Strong Loan Book Growth and Diversification

Suryoday Small Finance Bank reported a healthy 24.3% YoY growth in gross advances to ₹11,885 crores as of December 31, 2025. Disbursements, excluding Supply Chain Finance, grew 30.2% YoY to ₹6,230 crores for 9M FY26. The bank continues to diversify its portfolio, with the commercial vehicle book growing 35% to ₹1,609 crores and the mortgage book expanding 39% to ₹2,778 crores. The unsecured business loan portfolio also grew to ₹115 crores with a run rate of ₹20 crores per month.

Improving Asset Quality and CGFMU Coverage

The bank's GNPA ratio stood at 6.6% as of December 2025, with ₹467 crores of NNPA receivable under the CGFMU scheme, covering 99% of the inclusive finance book. Slippages in Q3 FY26 were ₹155 crores (₹116 crores MFI, ₹39 crores retail asset), down from ₹200 crores in Q2. Management targets further reduction to below ₹100 crores in Q4. Collection efficiency for the IF portfolio is inching towards 99.5%, and SMA bucket collections for MFI are 55-60%.

Robust Deposit Franchise and Digital Adoption

The deposit base grew 32.5% YoY to ₹12,865 crores, with retail deposits constituting 87% of the total. The CASA ratio improved to 21.2%, underscoring enhanced granularity and franchise depth. Digital channels are a key growth driver, contributing nearly 30% of incremental deposit accretion and expanding the customer base to 3.7 million as of December 2025, up from 3.3 million a year earlier.

Profitability Trends and Outlook

Net total income for 9M FY26 increased 3.2% YoY to ₹1,052 crores, though Net Interest Income decreased from ₹862 crores to ₹782 crores. The cost of funds remained stable at 7.7% as of December 2025. The cost-to-income ratio for 9M FY26 increased to 73.6% from 66.4% last year, and PBT for the period was ₹102.2 crores, down from ₹148.7 crores. Management targets a cost-to-income ratio below 65% in FY27 and a steady-state credit cost of not more than 1%.

Strategic Shift to Individual Lending and Credit on UPI

The bank's inclusive finance book now comprises approximately 72% individual loans, enhancing customer quality and portfolio granularity. Credit on UPI is identified as a game-changer, with 2.2 lakh active customers in one quarter and an acquisition rate of 1.5 lakh customers per month, building an AUM of ₹30 crores. This digital product allows customers to start with low credit limits and graduate based on repayment behavior.

Capital Adequacy and Fundraise Strategy

The bank maintains a strong capital adequacy ratio of 21.9%, well above the regulatory requirement of 15%, providing adequate headroom for future growth. While a QIP is an enabling provision, management stated no intent to dilute at the current price, as capital is not immediately required for growth. The bank also noted it has a large room for Tier 2 capital if needed.

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

More Financial Services earnings calls