- Analysts forecast ~21% YoY growth in Net Interest Income (NII) for Q3FY26.
- Profit After Tax (PAT) is expected to rise ~20% YoY, driven by robust loan book expansion.
- Margins may stay flat around 8.5% or improve slightly as borrowing costs ease.
- Credit costs are projected to dip below 2%, signaling improving asset quality.
- Loan book growth of ~22% YoY puts Bajaj Finance ahead of most NBFC peers.
- New customer acquisition adds 4.8 million users, pushing the total base above 115 million.
You’re overlooking the biggest catalyst in Bajaj Finance’s upcoming earnings—its loan book explosion.
Why Bajaj Finance’s Loan Book Growth Beats the Sector Average
Bajaj Finance’s assets under management (AUM) are slated to reach roughly ₹4.9 lakh crore, reflecting a 22% year‑on‑year surge and a 5% sequential increase. This outpaces the broader non‑banking financial company (NBFC) segment, where average loan growth hovers around 15% YoY. The engine behind this expansion is a diversified mix of consumer durable loans, personal loans, and an increasingly digital lending platform that captures younger, tech‑savvy borrowers.
Historically, Bajaj Finance has leveraged its strong brand equity and a deep distribution network to capture market share from both traditional banks and emerging fintechs. In the 2018‑19 cycle, the company posted a 19% YoY loan book increase, which translated into a 15% jump in NII. Replicating that pattern suggests a repeatable growth playbook that can sustain the projected 21% NII lift.
Margin Outlook: Flat or Slightly Higher? What the Numbers Reveal
Analysts expect net interest margins (NIM) to hold near 8.5% for the quarter. Kotak Equities argues that softer yields will be offset by a modest decline in the cost of borrowings, leaving spreads relatively unchanged. Emkay Global, however, sees a chance for marginal improvement if the funding mix continues to shift toward lower‑cost deposits and digital‑first financing.
For context, Bajaj Finance’s NIM has hovered between 8.3% and 8.6% over the past twelve quarters. A stable or slightly higher margin in a rising rate environment is a positive signal, indicating the firm’s ability to price risk efficiently without sacrificing loan growth.
Credit Cost Trajectory: From 2.3% to Sub‑2% – Why It Matters
Credit cost—essentially the portion of loan assets that turn non‑performing—has been a focal point for investors. The consensus is a sequential dip to around 1.95%, down from the 2.0‑2.3% band seen in the previous four quarters. This decline is anchored by three factors:
- Improved underwriting standards, especially in the consumer loan segment.
- Higher digital verification reducing fraud incidence.
- Gradual portfolio re‑balancing away from higher‑risk MSME and mortgage exposures.
Gross Stage‑3 assets are projected at 1.2% with net Stage‑3 at 0.6%, implying limited stress despite the rapid loan book expansion.
Competitive Landscape: How Tata, HDFC and Others Are Responding
Peers such as Tata Capital and Adani Capital have intensified their digital push, but neither matches Bajaj Finance’s scale of new‑customer acquisition. Tata Capital’s loan book grew 14% YoY in the same period, while Adani’s NBFC arm posted a 12% increase. Both firms are still wrestling with higher credit costs, averaging 2.4%.
The competitive edge for Bajaj Finance lies in its ability to cross‑sell across product lines—personal loans, consumer durables, and micro‑finance—while maintaining a low cost‑to‑average‑AUM ratio of roughly 3.8%.
Sector Trends: Digital Lending and Regulatory Headwinds
The Indian NBFC sector is undergoing a digital transformation, accelerated by higher smartphone penetration and fintech collaborations. This shift is expected to keep loan growth robust, but regulatory scrutiny—particularly around asset quality disclosures and the new labour code—could compress cost efficiencies.
Nevertheless, the easing of borrowing costs across the banking system provides a tailwind for NBFCs that can lock in cheaper funds, a scenario that favors Bajaj Finance’s already diversified funding strategy.
Historical Parallel: The 2022 Earnings Spike and Its Aftermath
In FY22, Bajaj Finance reported a 20% YoY surge in NII, driven by a similar loan book expansion. The subsequent quarter saw a slight margin compression due to higher funding costs, but the firm quickly rebounded as credit costs fell below 2%.
The pattern underscores a resilient business model: rapid loan growth, disciplined credit risk, and an ability to adapt funding sources. Replicating this cycle in FY26 could deliver comparable upside.
Investor Playbook: Bull vs. Bear Cases
Bull Case: Continued loan book acceleration (>20% YoY), margins nudging higher, credit costs sub‑2%, and a growing retail customer base (>115 million). These factors could push NII growth beyond 21% and lift earnings per share (EPS) by double‑digit percentages.
Bear Case: A slowdown in consumer loan demand, regulatory constraints tightening credit underwriting, or a resurgence of delinquency in MSME segments could erode margins and push credit costs back above 2.5%, dampening profit growth.
Investors should monitor three leading indicators: loan disbursement trends, NIM trajectory, and the net Stage‑3 asset ratio. A bullish outlook hinges on these staying in line with analyst expectations.