Ujjivan Small Finance Bank Q1 Earnings Unwrapped 👇

The turnaround is increasingly looking structural rather than merely a recovery from the MFI stress cycle. Ujjivan is simultaneously growing faster, lowering funding costs, improving asset quality & shifting towards secured lending — enough for management to upgrade FY27 RoA guidance to 1.8–2.0%. Markets are reacting to it already.

🟢 Growth has accelerated sharply. Gross loan book grew 29% YoY while disbursements jumped 41%, with Ujjivan delivering its highest-ever Q1 disbursements of ₹9,245 crore.

🟢 The liability franchise is becoming a real strength. Deposits grew 25% and CASA 38% YoY while cost of funds declined 71 bps YoY — helping NIM improve to a very healthy 8.5%.

🟢 The secured transformation has crossed an important milestone. Secured loans now form 50.4% of the book, growing 43% YoY, while newer Gold and Vehicle Finance businesses have already crossed ₹1,000 crore each.

🟢 Profitability is inflecting faster than expected. Record NII of ₹1,186 crore, record PPOP of ₹548 crore and PAT of ₹317 crore pushed Q1 RoA to 2.2% and RoE to 18.2%.

🟢 Asset quality continues to heal despite rapid growth. GNPA/NNPA improved to 2.17%/0.34%, Portfolio-at-Risk fell to 3.58% from 4.81%.

🔴 Operating expenses are the key number to monitor. Branch expansion, technology and capability investments will keep FY27 opex elevated; management expects these investments to reduce FY27 operating leverage by ~0.4% of average assets.

🔴 Credit costs haven't completely normalized yet. Despite encouraging Q1 slippages, management retains FY27 credit-cost guidance of 0.9–1.0%, meaning the current profitability shouldn't be annualised.

The bigger learning

The most interesting development isn't the ₹317 crore PAT. It's that Ujjivan is beginning to demonstrate that it can grow at ~30% while simultaneously de-risking the balance sheet. The old Ujjivan thesis was largely MFI recovery + normalization of credit costs.

The emerging thesis is much more interesting: a diversified retail bank with a growing secured franchise, improving CASA, falling funding costs and operating leverage. This is why Management's earlier long-term roadmap targeted 1.8–2.0% RoA by FY30; it is now guiding to that range for FY27 itself.

Disclaimer - Invested & Biased.