Bajaj Finance Q1FY2026

Net earnings above estimates by 2.8% (up by 21.8% y-o-y and 4.8% q-o-q) to Rs. 4,765 crore. NIM (as a percentage of AUM) came in at 9.27% down by 18/15 bps (y-o-y/q-o-q) due to higher drop in yield. It was also below estimates by 3 bps. Credit cost below estimates by 3.9%.However it was on elevated level and grew by 25.9% y-o-y and down by 9.0% q-o-q to Rs. 2,120 crore due to stress in 2 & 3-wheeler and MSME businesses. Thus, the company has taken significant credit actions in both these businesses hence AUM growth will be low for these business in FY26. AUM grew by 24.6%/5.9% (y-o-y/q-o-q), to Rs. 441,450 crore driven by robust growth on yearly basis across the segments except two and three wheelers. Asset quality deteriorated in the quarter. GS-3 was up by 17/7 bps (y-o-y/q-o-q) while NS-3 was up by 12/6 bps (y-o-y/q-o-q).

 Weak Commentary

• Management maintained their previous Q4 assessment of 24-25% AUM growth for now, suggesting waiting until Q2 end for more clarity.
• Fee income growth is guided at 13-15% for FY26, continued on low levels.
• Credit costs is expected at elevated level between 185-195 basis points.
• Management expects 10 basis points of NIM expansion could happen by end of the year, supported by the 50 basis point rate cut and 20 basis point improvement in cost of funds in Q1.

View: The company reported healthy quarter however asset quality deteriorated. Management also came out with elevated credit cost guidance, lower NIM expansion, asset quality challenges in couple of segments (2-3 Wheelers and MSME business) and continued with lower growth guidance for other income. Hence, negative for the stock.