Bajaj Finance shares in focus after high provisions in Q3, guidance to impact

Shares of Bajaj Finance Ltd. will be in focus on Wednesday, February 4, after the company reported its third quarter earnings, where accelerated expected credit loss provisioning emerged as a key negative for the quarter.

During the quarter, Bajaj Finance reported a one-time gain of ₹1,416 crore from the sale of a part of its stake in Bajaj Housing Finance to comply with the RBI's minimum public shareholding norms. The company continues to own 86.7% in Bajaj Housing Finance.

The gains were recognised in net worth and not routed through the consolidated profit and loss account, as Bajaj Finance remains the parent entity with majority ownership.

The lender also strengthened its ECL framework, which resulted in accelerated provisions of around ₹1,406 crore.

While net interest income and pre-provision operating profit were broadly in line with expectations, growing close to 20% year-on-year, provisions rose sharply by about ₹1,400 crore, leading to higher-than-estimated credit costs.

Profit after tax declined 6% YoY and came in 21% below consensus estimates. Excluding the impact of accelerated ECL provisions, PAT stood at ₹5,317 crore, broadly in line with expectations.

On the operating front, calculated net interest margins remained steady at 9.55% sequentially.

Credit costs, however, jumped to 3.06% from 2.01% QoQ, although excluding accelerated ECL provisions, credit costs would have declined by around 10 basis points.

Return on assets slipped to 4.3% from 4.5% in the previous quarter.

Management commentary also remained cautious. The company said the accelerated ECL provisioning was undertaken to make the balance sheet and P&L more shock-proof, adding that rising customer leverage was one of the factors considered, though not directly attributed as the sole reason.

Management reiterated growth guidance of around 22%, as against its earlier FY26 guidance of 22-23%.

On a more positive note, management indicated that despite accelerated ECL provisions, which are expected to continue for the next two to three years, credit costs are seen at 165-175 basis points in FY27.

The company also pointed to its focus on AI-led strategy implementation to lower credit costs, drive productivity gains and enable hyper-personalisation.

Bajaj Finance shares ended Tuesday session 6.67% higher at ₹964. The stock is flat on a year-to-date basis.