Ujjivan Small Finance Bank Q1 FY27: Record earnings, steadier credit costs, and a bigger secured tilt

Ujjivan Small Finance Bank reported a strong start to FY27 for the quarter ended June 30, 2026. Profit after tax rose to INR 317 crore, up from INR 103 crore in Q1 FY26, supported by higher net interest income and lower credit costs. Net interest income increased to INR 1,186 crore and net interest margin stayed stable at 8.5%.

The quarter was also a milestone from a strategic perspective. The bank continued to push portfolio diversification, taking the secured share of the gross loan book to 50.4%. On the funding side, deposit growth accelerated, with total deposits rising 24.6% year-on-year to INR 48,129 crore and CASA deposits growing 37.8% year-on-year to INR 12,930 crore.

The quarter in numbers

Operationally, the bank posted its highest pre-provision operating profit to date at INR 548 crore. Cost discipline helped, even though personnel expenses rose due to salary increments and other staff-related costs.

Asset quality trends improved. The bank reported credit cost of INR 127 crore in Q1 FY27 versus INR 225 crore in Q1 FY26. Management also highlighted a materially lower slippage ratio, helped by healthy collections in micro banking.

Balance sheet growth: deposits lead, loan book expands

The bank ended June 2026 with a gross loan book of INR 42,903 crore, growing 28.9% year-on-year and 5.5% sequentially. Disbursements for the quarter were INR 9,245 crore.

Deposits, however, were the bigger highlight given the market’s tight liquidity backdrop discussed on the call. Total deposits grew to INR 48,129 crore. The retail franchise continued to deepen, with retail deposits (as shown in the presentation’s breakup) increasing to INR 14,488 crore and bulk term deposits at INR 32,716 crore.

Management said the bank maintained comfortable liquidity, with average LCR around 132% for Q1 FY27. It also noted that rate changes were implemented in June on key deposit buckets to align with ALM outcomes, but did not see an immediate need for further upward revisions.

Diversification continues: secured book crosses 50%

Ujjivan has been moving steadily away from an over-reliance on micro banking. That shift remained visible in Q1.

Secured gross loan book rose to INR 21,638 crore, up 42.7% year-on-year and 7.8% quarter-on-quarter. Within the portfolio, affordable housing and micro mortgages together stood at INR 11,210 crore, with asset quality reported at GNPA of 1.2% for affordable housing and 0.6% for micro mortgages.

MSME also expanded sharply. The MSME book grew 54% year-on-year to INR 3,470 crore. Management highlighted that working capital and supply chain finance together contributed around 28% of the MSME book, and that the new MSME book had minimal NPA.

Newer products are scaling from a smaller base but are already meaningful in growth conversations. Gold loans reached INR 1,020 crore and vehicle loans reached INR 1,036 crore, with both crossing INR 1,000 crore gross loan book milestones.

Asset quality and provisioning: better collections, higher coverage

The presentation reported GNPA and NNPA at 2.2% and 0.3% as of June 2026. The bank also disclosed a strengthening of provision coverage ratio to 85%.

On the call, management linked improved credit costs to sustained collection efficiency. Bucket X collection efficiency for micro banking was stated at 99.68% for the quarter and management indicated July trends were broadly similar.

The bank’s Q1 FY27 NPA movement showed opening NPA of INR 917 crore, slippages of INR 171 crore, recoveries or upgrades of INR 93 crore, write-offs of INR 72 crore, and closing NPA of INR 924 crore.

Guidance and what management changed after Q1

The most important takeaway from the quarter may be the guidance update.

Management reiterated FY27 advances growth guidance of around 25%. It revised credit cost guidance to 0.9% to 1.0% of average total assets and raised RoA guidance to 1.8% to 2.0%. It also said it is moving away from credit cost guidance on average gross loan book to an average balance sheet basis.

A second driver of the guidance change was cost outlook. Management said planned capacity building expenses of around INR 250 crore were delayed in Q1 due to planning, with spending starting in June. It guided full-year opex to average assets at around 6.4%, with the impact expected over the remaining quarters.

The bank also outlined multiple operating initiatives, including branch expansion and digital initiatives. It said 38 new branches were opened in Q1 FY27, taking total branches to 814. In Q&A, management also referenced a plan to open 144 branches in FY27.

On the asset side, management noted that an unsecured fast-track loan completed a successful pilot and is ready for scale-up, a pre-owned car product was piloted in Karnataka, and lending to mid-corporates commenced with disbursements in Q1. It also said the MSME product suite was expanded with purchase invoice discounting.

Takeaways

Ujjivan’s Q1 FY27 results show a bank benefiting from three converging trends: improving credit costs, a steady margin profile, and a more diversified loan book with secured lending now above 50%. Deposit growth and liquidity buffers look supportive, although management continues to flag the tight funding environment and competitive pressure in CASA.

The raised RoA guidance to 1.8% to 2.0% and tighter credit cost guidance place execution under a clearer spotlight for the rest of FY27, especially as capacity-building spend ramps up and cost ratios normalise from Q1 levels.