**Market Brief: Utkarsh Small Finance Bank Q3 FY26 Performance** **Financial Headwinds Persist** Utkarsh Small Finance Bank continues to navigate a challenging restructuring phase, reporting a significant widening of its **net loss to ₹375 crore** for the third quarter ended December 31, 2025. This marks a sharp deterioration from the **₹168 crore loss** recorded in the corresponding quarter of the previous fiscal year. The bottom line remains under pressure due to elevated provisions and a contraction in the loan book. Sequentially, the loss increased from **₹349 crore** in Q2 FY26, signaling that the bank's transition away from high-risk segments is still weighing heavily on profitability. **Operational Metrics Turn Negative** In a stark reversal from the previous year, the bank posted an **operational loss of ₹44 crore**, contrasting sharply with an operational profit of **₹185 crore** in Q3 FY25. This operational drag is largely attributed to reduced interest income from a shrinking loan portfolio and sustained operating expenses. **Loan Book Contraction & Strategic Shift** The bank is aggressively pivoting its lending strategy, moving away from unsecured microfinance to secured asset classes. * **Total Gross Loan Portfolio** contracted by **3.9% YoY** to **₹18,306 crore**. * The high-risk **Joint Liability Group (JLG)** portfolio saw a massive reduction of **34.1%**, reflecting a deliberate clean-up of the microfinance book. * Conversely, the **Non-JLG (secured)** portfolio grew by a robust **27.6%**, creating a more stable, albeit currently smaller, asset base. **Asset Quality: A Glimmer of Improvement** Despite the heavy losses, asset quality metrics showed early signs of stabilization. * **Gross Non-Performing Assets (GNPA)** improved to **11%** in December 2025, down from the peak of **12.4%** seen in the September quarter. * While still elevated, this sequential dip suggests that the worst of the slippages from the legacy book may be plateauing as the bank accelerates write-offs and recoveries. **Deposit Franchise Remains Resilient** On the liability side, the bank continues to strengthen its funding profile. * **Total Deposits** grew **4.5% YoY** to **₹21,087 crore**. * **CASA (Current Account Savings Account)** deposits surged **16.1%**, improving the CASA ratio to **21.9%** (up from 19.7% a year ago). * **Retail Term Deposits** jumped **23.8%**, reducing reliance on volatile bulk deposits, which were cut by **35.6%**. **Stock Market Reaction** Investor sentiment remains cautious given the prolonged stress. The stock is currently trading around **₹13.60–₹13.75**, hovering near its 52-week lows and significantly below its IPO issue price of **₹25**. The market cap stands at approximately **₹2,400 crore**, reflecting the deep discount applied by the street as it awaits a clear turnaround in profitability. **Outlook** The Q3 numbers confirm that Utkarsh SFB is in the middle of a painful but necessary "kitchen-sinking" exercise. While the contraction in the loan book and operational losses are concerning, the shift toward secured lending and the sequential improvement in asset quality offer a roadmap for long-term stability once the legacy stress is fully absorbed. [Utkarsh Small Finance Bank Q3 loss widens to Rs 375 crore](https://www.google.com/search?q=https://www.youtube.com/watch%3Fv%3D3uXlK7w_t_s) This video provides a concise summary of the Q3 FY26 earnings report, highlighting the widening losses and key operational metrics discussed in the brief.