India's Bajaj Finance posts surprise profit drop on jump in provisions (updated)

Bajaj Finance

03/02/2026 12:09

Adds comments from conference call in paragraphs 6,7,8,10 and 13

By Nishit Navin

Feb 3 (Reuters) - India's Bajaj Finance BJFN.NS reported a surprise decline in quarterly profit on Tuesday as the non-bank lender ramped up provisions to strengthen its balance sheet, even as it expects credit cost to improve going forward.

The non-banking financial company reported a 6% year-on-year drop in consolidated net profit to 39.78 billion rupees ($440.83 million) for the quarter ended December 31.

Analysts, on average, had expected a profit of 51.28 billion rupees, per data compiled by LSEG.

During the quarter, the company introduced a minimum loss-given-default (LGD) threshold - a benchmark for expected loss if a borrower defaults - across its businesses, it said, as the lender sought to strengthen its balance sheet amid global economic uncertainty.

 This resulted in additional provisions of about 14.06 billion rupees. Total provisions against potential bad loans rose 77% to 36.25 billion rupees.

"It's purely done as a proactive and voluntary measure by the company," Vice Chairman and Managing Director Rajeev Jain said in a post-earnings call.

The company will continue to apply the defined LGD threshold, which will have some level of "small" annualised impact in the next fiscal, he said.

Indian lenders have grappled with higher bad loans in unsecured segments such as microfinance and loans given to micro, small and medium enterprises (MSME) following a period of aggressive lending. The company has since tightened lending in certain segments to rein in credit costs.

Bajaj Finance expects credit cost - or the expense set aside for potential loan defaults - to improve going forward, estimating it in the range of 1.65%-1.75% in the next fiscal year. It stood at 1.91% for the reporting quarter before the additional provisions.

In November, the diversified lender trimmed its growth forecast for assets under management (AUM) for the current financial year to 22-23% from 24-25%, citing bad loans in its MSME segment.

($1 = 90.2390 Indian rupees)

(Reporting by Nishit Navin; Editing by Sonia Cheema and Leroy Leo)

((Nishit.Navin@thomsonreuters.com;))