AU Small Finance Bank's performance in Q2FY25 was a mix, with a return on assets (RoA) of 1.6% and a loan growth of 6% quarter-on-quarter.

The bank's credit cost increased to 1.6% from 1.4% in the previous quarter due to higher stress in secured retail assets and increased slippages in the microfinance institution (MFI) and credit card segments.

The bank has revised its full-year credit cost guidance to 1.3% to account for anticipated challenges in the MFI and credit card sectors. To address these challenges, the bank has implemented measures such as tightening underwriting standards, reducing loan amounts, and strengthening its collections team.

ICICI Securities has a HOLD rating on AU Small Finance Bank, with a target price of INR 630, valuing the stock at 2.5 times the estimated book value per share for September 2025.