Thrissur: ESAF Small Finance Bank reported its highest-ever quarterly net profit of Rs160 crore in the second quarter of FY27, recovering from a net loss of Rs116 crore in the year-ago quarter, as asset quality improved sharply and business expanded.
The bank's profit more than doubled from Rs80 crore in the preceding quarter. Its gross advances grew 25 per cent year-on-year to Rs23,934 crore as of September 30, 2026, while deposits rose 24 per cent to Rs28,466 crore.
Asset quality showed a significant improvement, with gross non-performing assets (GNPA) declining to 2.8 per cent from 8.5 per cent a year earlier. Net NPAs fell to 0.3 per cent from 3.8 per cent. The provision coverage ratio improved to 94 per cent from 74.4 per cent.
The improvement in asset quality was accompanied by a sharp rise in operating profitability. Pre-provision operating profit (PPOP) surged 289 per cent year-on-year to Rs362 crore, while net interest margin (NIM) increased to 8.2 per cent from 5.9 per cent. The cost-to-income ratio improved to 57.7 per cent from 82 per cent.
Interest income rose 43 per cent to Rs1,175 crore during the quarter.
Secured loans
ESAF's lending portfolio continued to shift towards secured loans. Secured advances grew 32 per cent year-on-year to Rs15,377 crore, accounting for 64 per cent of total advances. The gold loan portfolio increased 39 per cent to Rs10,456 crore, representing approximately 44 per cent of gross advances.
Unsecured advances stood at Rs8,557 crore, up 15 per cent year-on-year, although they declined 2 per cent sequentially. The bank's emerging-household portfolio, which includes customers graduating from microfinance to other forms of lending, grew 134 per cent year-on-year.
Deposits increased to Rs28,466 crore, with the retail deposit component crossing Rs25,000 crore to reach Rs25,475 crore. The bank's credit-deposit ratio stood at 82 per cent, while its capital adequacy ratio was 24.1 per cent.
The bank also reported a liquidity coverage ratio of 141.5 per cent as of September 30, 2026.
ESAF's latest performance marks a substantial improvement from the stress reflected in its year-ago results. The bank attributed its progress to its strategic transformation and a more diversified, increasingly secured loan portfolio.
Managing director and chief executive K Paul Thomas said secured advances now accounted for 64 per cent of the bank's total advances, reflecting its strategy of building a diversified portfolio while continuing to serve underserved customers.
