--- title: "AU SFB's universal bank transition to unlock growth opportunities: MOFSL" type: "News" locale: "en" url: "https://longbridge.com/en/news/278518123.md" description: "AU Small Finance Bank is transitioning to a universal bank, which is expected to unlock significant growth opportunities. Brokerage firm Motilal Oswal Financial Services maintains a 'Buy' rating, projecting a target price of ₹1,250, indicating a 34% upside. Despite a year-to-date decline of over 6%, the bank's strong asset quality and evolving business model position it well for future growth. The transition is anticipated to enhance credibility and improve earnings trajectory, with expected loan CAGR of 24% and earnings CAGR of 36% over FY26-28." datetime: "2026-03-10T00:20:24.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/278518123.md) - [en](https://longbridge.com/en/news/278518123.md) - [zh-HK](https://longbridge.com/zh-HK/news/278518123.md) generator: "portal-rs" --- # AU SFB's universal bank transition to unlock growth opportunities: MOFSL **AU Small Finance Bank share price target:** Brokerage firm Motilal Oswal Financial Services has reiterated its ‘Buy’ call on AU Small Finance Bank, maintaining a positive outlook despite the stock underperforming the Nifty Bank index in 2026 so far. The brokerage said the lender has evolved from a niche vehicle finance NBFC into a diversified, pan-India banking franchise, which positions it well for the next phase of growth. It noted that the lender's transition to a universal bank will "unlock larger growth opportunities". Shares of AU Small Finance Bank have declined more than 6 per cent on a Y-T-D basis, compared with a fall of around 4.5 per cent in the Nifty Bank index. During Tuesday’s trade, the stock was marginally higher, trading about 0.7 per cent up at ₹939 around 1PM, even as the Nifty Bank index advanced 1.3 per cent. Motilal Oswal expects the stock to rally to ₹1,250, implying an upside of around 34 per cent from current levels. According to the brokerage, key triggers that will drive the stock higher include accelerating earnings momentum driven by lower Cost of Funds (CoF) and credit costs; a potential capital raise in FY27, and the transition to universal banking. **ALSO READ: US-Iran war puts ₹70,000 cr dent in LIC's portfolio; banks, L&T worst hit** **Strong asset quality** The brokerage said that AU Small Finance Bank has historically maintained strong asset quality, led by a secured-heavy portfolio, conservative underwriting, and timely portfolio recalibration. Recent stress has been largely concentrated in unsecured segments, such as MFI and credit cards, which, although comprising only 7-8 per cent of the loan book, contributed a disproportionate share of credit costs in FY25. The core secured business, particularly vehicle finance (32 per cent of advances), has remained stable and continues to outperform peers. The brokerage expects overall credit costs to moderate from 1.4 per cent in FY26 to 1 per cent by FY27–28. Asset quality metrics are likely to remain broadly stable, with GNPA and NNPA sustaining around 2 per cent and 0.6 per cent, respectively, by FY28. **ALSO READ: HDB Financial gets 'Buy' rating from ICICI Sec; target ₹900, 34% upside** **Transition to universal bank** AU Small Finance Bank’s transition from a dominant small finance bank to a credible universal banking franchise "marks a shift from asset-led growth to a scalable, diversified, and structurally stronger compounding franchise with enhanced credibility and funding access." "With a strong SFB platform already built, the transition to a universal bank unlocks larger growth opportunities while providing greater portfolio flexibility and the potential for stronger returns," it said. Recently, the RBI eased a key condition for AU Small Finance Bank, paving the way for its transition to a universal bank. The central bank removed the clause that mandates promoters to hold shares through a non-operative financial holding company. This transition, it said, will also improve the lender's credibility and strengthen its long-term earnings trajectory. MOFSL expects AUBANK to deliver 24 per cent loan CAGR over FY26-28, which, combined with improving operating metrics, should translate into 36 per cent earnings CAGR over the same period. RoA and RoE for FY27 are likely to improve to 1.74 per cent and 17.2 per cent, respectively. The brokerage also highlighted that the bank has emerged as the clear leader in the SFB space, with a market capitalisation that is more than twice that of all its peers combined. This position, it said, is supported by superior scale and consistent profitability. **\========================= Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. 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