Earnings Review
AU Small Fin Bk up 42% on yr on support from Fincare merger
This story was originally published at 21:43 IST on 23 October 2024
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--AU Small Fin Bank Jul-Sept net profit INR 5.71 bln
--Analysts saw AU Small Fin Bank Jul-Sept net profit INR 5.11 bln
--AU Small Fin Bank Jul-Sept net profit INR 5.71 bln vs INR 4.02 bln yr ago
--AU Small Fin Bank gross NPA ratio 1.98% as on Sept 30 vs 1.78% qtr ago
--AU Small Fin Bank net NPA ratio 0.75% as on Sept 30 vs 0.63% qtr ago
--AU Small Fin Bank Jul-Sept total income INR 45.49 bln vs INR 29.37 bln
--AU Small Fin Bank Basel III capital adequacy ratio 18.51% as on Sept 30
--AU Small Fin Bank Jul-Sept provisions INR 3.73 bln vs INR 952.74 mln
--AU Small Fin Bank Apr-Sept net profit INR 10.74 bln vs INR 7.89 bln yr ago
--AU Small Fin Bank Apr-Sept total income INR 88.27 bln vs INR 57.03 bln
--AU Small Fin Bk: Apr-Sept microfin book contingency provision INR 170 mln
--AU Small Finance Bank: Jul-Sept NII INR 19.74 bln, up 58% on year
--AU Small Finance Bank Jul-Sept NIM 6.1% vs 6.0% quarter ago
--AU Small Fin Bk deposits at INR 1.10 tln as on Sept 30, up 12.7% on qtr
--AU Small Fin Bk CASA deposits at INR 355.2 bln as on Sept 30, up 11% on qtr
--AU Small Finance Bank CASA ratio at 32% as on Sept 30
--AU Small Finance Bank advances at INR 1.05 tln as on Sept 30, up 5.3% QoQ
--AU Small Finance Bank credit-deposit ratio at 86% as on Sept 30
By Siddhi Chauhan
MUMBAI – AU Small Finance Bank Ltd.'s net profit for Jul-Sept beat the Street's estimate by rising 42.2% on year to INR 5.71 billion on the back of its merger with Fincare Small Finance Bank. "As per the Scheme, upon its coming into effect from the Apr. 1, the entire undertaking of Fincare including all its assets, liabilities and reserves and surplus stood transferred/ deemed to be transferred to and vest in AU," the bank said in a press release.
The merger of Fincare Small Finance Bank with the bank came into effect on Apr 1. Analysts pegged the bank's bottom line at INR 5.11 billion. Sequentially, the bottom line saw a rise of 13.7%. In the six months ended September, the bank's net profit rose to INR 10.74 billion against INR 7.89 billion a year ago.
Consequently, in Jul-Sept, the bank's net interest income grew 58% on year to INR 19.74 billion. However, on quarter, the bank's net interest income for Jul-Sept witnessed only a marginal 3% growth, which is in line with what analysts had expected.
Most brokerages had expected the bank's net interest margin to remain under pressure due to a rise in funding costs across the industry. In Jul-Sept, the bank's total expenses rose 48% on year to INR 34.17 billion against INR 23.09 billion.
Other income saw an on-year rise of 57% to INR 6.38 billion in the three months ended September. Other income also saw support from treasury gains from investment activities, aided by favourable interest rate movement and strong capital markets.
In the September quarter, the bank's total income rose 54.9% on year to INR 45.49 billion. The bank's net interest margin in the quarter ended September was 6.1% against 6.0% in the previous quarter. The net interest margin was aided by optimisation of investment books that were seen during Apr-Jun and Jul-Sept, the bank said in a press release. The bank expects its net interest margin to remain around 6.0% throughout the year.
In the Jul-Sept quarter, the bank's growth in advances remained strong, rising 5.3% on quarter to INR 1.05 trillion. Microfinance, credit cards, and personal loans together form 11.4% of the total loan portfolio, as per the bank's investor presentation.
Meanwhile, the bank's deposits were INR 1.10 trillion up 12.7% on quarter. The current account savings account deposits grew 11% on quarter to INR 355.20 billion. The CASA ratio was largely steady at 32% as of Sept. 30 from 32.9% in the previous quarter. The bank's credit to deposit ratio was at 86% by the end of September, lower as compared to 92% as on Jun. 30.
In the quarter ended September, the lender's provisions rose by 291.5% to INR 3.73 billion. The bank's provision coverage ratio was at 82%, including technical write-offs. The bank also created a contingency buffer of INR 170 million rupees for the microfinance portfolio.
The lender's asset quality deteriorated with the gross non-performing assets ratio rising to 1.98% in the Jul-Sept quarter against 1.78% quarter ago. The net non-performing assets ratio also increased to 0.75% from 0.63% a quarter ago. Unsecured book accounted for 2.8% of gross non-performing assets. Out of which microfinance contributed 2.3%, credit card 3.2%, and personal loans at 5.1%.
The bank's credit cost stood at 0.28% in the quarter ended September. "Credit costs to remain elevated and expect to finish full year around the same levels as in H1 (Apr-Sept) based on current outlook. There could be a variance of 5-10 bps depending on economic conditions," the bank said in the investor presentation.
The capital adequacy ratio of the bank was at 18.51% as on Sept. 30, against 20.11% on Jun. 30. On Wednesday, shares of the bank closed 2.1% higher at INR 652.05 on the National Stock Exchange. End
Edited by Vidhi Verma and Manisha Baxla
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