ESFBL, the second-largest SFB in India by total advances as of FY24, experienced a modest net advances growth of 18% YoY. This growth was driven by significant increases in small business loans (28% YoY), used car vehicle finance (53% YoY), and housing finance (23% YoY).

The bank's deposit growth surged by 29.2% YoY, although the CASA ratio decreased to 30.6%, reflecting a sequential drop of 68 basis points. Despite a 7.9% YoY increase in Net Interest Income for Q2FY25, the bank faced challenges with rising costs of funds and falling yields on disbursements, resulting in a contraction in NIM by 28 basis points to 7.69%.

The management highlighted increasing stress in the microfinance sector, with GNPA and NNPA deteriorating to 2.95% and 0.97%, respectively. To address asset quality concerns, the bank raised its provision coverage ratio to 67.7%. Other income grew by 10% YoY, driven by treasury and asset fee income. However, a significant rise in provisions led to a 94% YoY decline in PAT to Rs. 12.9 crore.

Geojit Financial Services downgraded its rating on Equitas Bank from Accumulate to Hold, setting a target price of Rs. 69 based on 1.2x FY26E BVPS, citing ongoing challenges in the microfinance segment.