/** blogpostTitle: Ujjivan SFB Q4 FY26: Strong exit quarter, but FY27 stays conservative blogpostSlug: ujjivan-q4fy26 blogpostCoverImageDescription: Ultra realistic corporate finance scene showing a clean desk with a laptop displaying two adjacent charts: one line chart rising into the last data point to reflect improving quarterly profitability, and one stacked bar chart showing a loan book mix shifting toward secured assets. A separate small gauge style indicator shows high liquidity coverage. No logos or text, neutral office lighting, modern minimal aesthetic. blogpostShortTitle: Ujjivan SFB Q4 FY26 key shifts */

Ujjivan SFB Q4 FY26: Strong exit quarter, but FY27 stays conservative

Ujjivan Small Finance Bank ended FY26 with a clear improvement in quarterly profitability, even as full-year returns stayed below the peak levels seen earlier in the cycle. For Q4 FY26, the bank reported PAT of 282 crore versus 83 crore in Q4 FY25, supported by higher net interest income, lower credit costs versus the year-ago quarter, and better operating leverage. Return on assets for the quarter was 2.1% and return on equity was 17.2%.

The quarter also reinforced two longer-running themes in the bank’s strategy. First, the deposit franchise is being built with a sharper bias toward granular funding and higher CASA. Second, the loan book is being diversified with a faster shift toward secured assets. Both themes matter because they are linked to the bank’s aspiration to transition voluntarily to a universal bank, an application that RBI returned in April 2026 while acknowledging progress on loan book diversification.

A stronger quarter on core banking metrics

Net interest income in Q4 FY26 rose to 1,092 crore, up 26.4% year on year and 9.2% sequentially. NIM for the quarter was 8.5%, expanding 20 bps year on year. The bank attributed the improvement largely to better cost of funds, stable yields, and optimal liquidity deployment.

Operational efficiency improved in the quarter. Cost-to-income ratio reduced to 63% in Q4 FY26 from 68% in Q4 FY25. Pre-provision operating profit rose to 515 crore in Q4 FY26, up 43% year on year.

At the year level, the picture is more mixed. FY26 PAT was 693 crore versus 726 crore in FY25, and FY26 ROA and ROE were 1.4% and 10.9% respectively. The bank’s own messaging in the call acknowledged this contrast: Q4 reflects near-normal portfolio and operational performance, but FY26 still carries the residue of earlier stress and elevated operating and credit costs.

Deposits: steady growth and a higher CASA ratio

Deposit growth remained strong, with total deposits at 45,668 crore as of March 2026, up 21.4% year on year. CASA ratio improved to 28.6% as the bank leaned into granular acquisition and retail balances.

The presentation highlighted that retail term deposits plus CASA were 31,955 crore, growing 20% year on year, and comprising about 70% of total deposits. Management reiterated in the call that the focus remains on improving CASA further, indicating an expectation of around 29% to 30% CASA ratio, though without committing to a precise number.

Liquidity remained comfortable. The bank reported an LCR of 142% at March 2026, and management said the bank maintained a CD ratio around 88% to 89% to balance loan growth with deposit traction.

Loan book: growth continues, but mix shift is the bigger story

Gross loan book stood at 40,655 crore at March 2026, up 26.6% year on year. The secured portfolio grew faster, reaching 20,079 crore and forming 49.4% of the loan book. The bank positioned this as a structural improvement, supporting stability and diversification.

Within segments, the bank disclosed loan book composition for Q4 FY26. Group loans were 14,696 crore, individual loans were 6,014 crore, affordable housing loans were 8,900 crore, micro mortgages were 1,577 crore, MSME was 3,230 crore, and FIG lending was 3,000 crore. Newer products scaled quickly from a smaller base, with gold loans at 769 crore, vehicle loans at 944 crore and agri banking at 731 crore.

Asset quality indicators improved sequentially. The presentation highlighted that PAR and GNPA moderated to 3.5% and 2.3% respectively, while NNPA stood at 0.4%. Provision coverage ratio was reported at 81%.

Collections also strengthened. Bank-level collection efficiency up to 1 EMI plus OD improved to 98.3% in March 2026. In micro banking, bucket X collection efficiency remained high at around 99.7% to 99.8% in Q4.

FY27: clear guidance, and a conservative tone

The bank provided explicit FY27 guidance in both the investor presentation and the earnings call.

Advances growth is guided at around 25%. Credit cost is guided at 1.4% to 1.5% of average gross loan book. ROA is guided at around 1.6%.

Management also guided that NIM should stay close to the exit quarter, around 8.5%. It expects further relief in cost of deposits, with management mentioning a remaining benefit of around 30 bps from repricing.

The main debate on the call was around why ROA guidance is lower than the exit quarter. Management’s answer was consistent: FY27 will carry higher investment spending. It spoke about adding around 20% branches, and the CEO confirmed that this broadly translates to about 140 branches in FY27. It also mentioned spend on IT projects, AI investments, marketing, training programs, and operational efficiency initiatives. In closing remarks, management said opex to average total assets could be 20 to 30 bps higher than FY26 due to these investments.

Universal bank aspiration: reapply, but not immediately

A key corporate update in the call was the RBI communication received on April 13, 2026 regarding the bank’s voluntary transition to a universal bank. Management stated that RBI returned the application while acknowledging the bank’s ongoing diversification efforts.

Management said it will continue to engage with RBI and reapply at an appropriate time after demonstrating a more diversified portfolio. It also clarified that RBI does not prescribe a specific secured-unsecured ratio, so the bank will have to determine its own target mix and timing.

This context matters because it directly influences the bank’s FY27 loan mix stance. Management stated that micro banking would grow at a high single digit rate, while the secured book would scale much faster. One management response indicated an end-March 2027 mix around 56-44 on secured-unsecured.

Capital: board approval to raise up to 2,000 crore

Despite reporting strong regulatory capital ratios, the bank disclosed that its board has approved raising equity capital up to 2,000 crore. Management said the purpose is to support the targeted growth trajectory and maintain buffers above an internal threshold of 20% capital adequacy.

Timing was indicated as the second half of FY27, depending on market conditions.

Key takeaways

Ujjivan SFB’s Q4 FY26 numbers show a meaningful normalization of profitability and credit costs, alongside steady growth in deposits and the loan book. The stronger exit quarter is backed by improved cost metrics and stable asset quality.

For FY27, management is choosing a conservative posture on ROA while committing to growth and diversification. The combination of faster secured book scaling, branch expansion, and higher technology and analytics investments forms the core of the next-year plan. The universal bank aspiration remains active, but management has clearly signaled that the reapplication will come only after the mix shift is more visible and durable.