Comparative Analysis: Utkarsh vs Ujjivan vs Equitas vs Jana Small Finance Banks

Given the small-finance bank (SFB) space is subject to both high growth potential and elevated risk (especially around microfinance, unsecured loans and asset quality), the analysis emphasises key metrics such as profitability, NPA trends, provisioning, growth in advances/deposits, and risk signals.

1. Snapshot of Latest Results & Key Metrics

From the above snapshot we see two banks (Utkarsh and Equitas) are in loss territory or have serious stress, while Ujjivan and Jana remain profitable but face headwinds.

2. Why Utkarsh Is Falling & What Are the Key Risk Signals?

There are multiple reasons why Utkarsh’s share price has fallen sharply (some sources show ~50%+ drop from 52-week highs) and why the bank is under pressure:

• Legacy asset quality issues: Reports mention that Utkarsh’s microfinance/unsecured loan book is under stress — as a rating-agency note highlights “about a fifth of their microloan books under stress” for SFBs like Utkarsh. 
• High NPA levels: As of March 31, 2025 Utkarsh reported gross NPA ~9.43% vs 6.17% the prior quarter. Net NPA ~4.84%. These are materially higher than many peers, indicating loan loss burden.
• Net loss recorded: The bank reported negative net income in recent quarter (~-₹239 cr) and negative profitability metrics. 
• Capital adequacy / rights issue: The bank has announced a ~₹950 cr rights issue at a steep discount (37.5%). That signals capital stress or need to shore up balance sheet — often interpreted as a red flag by investors.
• Weak return ratios: The bank’s ROE/ROA appear very low or negative in recent quarters. 

Putting these together, Utkarsh shows several warning signals: rising NPAs, losses, recapitalisation via rights issue, and legacy microfinance stress. While it may not necessarily mean outright failure, it does suggest the bank is in a turnaround mode and carries higher risk than many peers.

3. Peer Comparison & Long-Term Investment View

Let’s compare the four banks on key investment parameters for long-term investors:

• Profitability & stability: Ujjivan and Jana are currently profitable (though margins/profits under pressure). Utkarsh and Equitas are showing losses or major stress.
• Asset quality: Jana (~2.9% gross NPA) and Ujjivan (~2.45% recently) look better; Utkarsh (~9.4%) is much worse. Equitas also has elevated stress. Lower NPAs means lower risk of surprise losses.
• Growth potential: Small finance banks can grow rapidly from low base; but growth must come with asset quality control. Ujjivan states growth of ~20% advances planned. Utkarsh’s growth is slower and under stress. Jana has strong loan growth but profits dropping due to costs and margin pressures. 
• Balance sheet strength / capital adequacy: A bank needing a large rights issue (Utkarsh) has weaker capital cushion. Stable banks with comfortable CAR are preferable.
• Valuation & investor sentiment: Banks under stress trade at depressed valuations, but that may reflect risk. A long-term investor should prefer banks with clear visibility rather than turnaround unknowns.

4. My Recommendation: Which Bank Is Best for Long Term?

Based on available public data and risk-return trade-off, here is my ranking and recommendation:

1. Best pick: Jana Small Finance Bank (Jana) — Among the four, Jana currently offers a comparatively balanced risk-return profile: profitable (though declining), reasonable asset quality (~2.9% gross NPA), visible growth, and lower immediate distress compared to Utkarsh/Equitas.
2. Second pick: Ujjivan Small Finance Bank (Ujjivan) — Profitable bank, decent asset quality, and growth plans. However profit halved in Q2 due to higher provisions, so one must watch provisioning trends and cost control.
3. High risk: Equitas Small Finance Bank (Equitas) — Currently facing losses, negative return ratios. Unless there is clear turnaround visible, this is speculative for long-term.
4. Very high risk / avoid for now: Utkarsh Small Finance Bank (Utkarsh) — Given very high NPA levels, net loss, capital raise, legacy micro-loan stress, the bank carries substantial turnaround risk. For long-term investment only if you believe in a clean-up and major re-rating — otherwise better to skip.

In summary: For a conservative long-term investor seeking exposure to SFBs, Jana appears the most prudent among these four. Ujjivan may be acceptable if you are comfortable monitoring asset quality closely. Utkarsh currently appears too risky unless you have high risk-tolerance and thorough conviction. Equitas lies somewhere in between but leans toward speculative at current stage.

5. What to Watch Going Forward (for All SFBs)

Even for the better-positioned banks (Jana, Ujjivan), monitor the following:

• Credit cost / provisions: Sudden rise in provisioning can hit profits hard (as seen at Ujjivan and others).
• Gross & Net NPA trends: Watch for uptick in unsecured loan segment, microfinance stress, or legacy book issues.
• Deposit growth & cost of funds: Banks need to attract low cost deposits (CASA) or else margin will compress.
• Regulatory developments & capital requirements: SFBs may need to raise capital if growth or stress rises.
• Loan mix shift: Transition from unsecured to secured loans helps; Utkarsh had pivot but still showing high NPAs. 18

Investor Takeaway

Related Queries on Small Finance Banks

• What are the main risks for small finance banks in India?
• How to interpret NPA and provisioning trends in SFBs?
• What growth drivers and cost pressures do SFBs face going forward?
• When is a small finance bank considered a turnaround opportunity versus a value trap?

SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.