Earnings Review
AU Small Fin Bank's Oct-Dec PAT up 41% YoY, beats estimates
This story was originally published at 18:19 IST on 24 January 2025
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--AU Small Finance Bank Oct-Dec net profit INR 5.28 bln
--Analysts saw AU Small Finance Bank Oct-Dec net profit at INR 5.03 bln
--AU Small Fin Bk Oct-Dec net profit INR 5.28 bln vs INR 3.75 bln year ago
--AU Small Fin Bk Oct-Dec net profit INR 5.28 bln vs INR 5.71 bln qtr ago
--CONTEXT: AU Small Fin Bank merged with Fincare Small Fin Bank on Apr 1
--AU Small Fin Bank gross NPA ratio 2.31% as on Dec 31 vs 1.98% qtr ago
--AU Small Fin Bank net NPA ratio 0.91% as on Dec 31 vs 0.75% qtr ago
--AU Small Fin Bk Oct-Dec total income INR 47.3 bln vs INR 45.5 bln qtr ago
--AU Small Fin Bank Basel-II capital adequacy ratio 18.01% as on Dec 31
--AU Small Fin Bk Oct-Dec provisions INR 5.02 bln vs INR 3.73 bln qtr ago
--AU Small Fin Bank Oct-Dec NII INR 20.23 bln vs INR 19.74 bln qtr ago
--AU Small Fin Bank Oct-Dec NIM 5.9%
--AU Small Fin Bank provision coverage ratio at 80% as on Dec 31
--AU Small Fin Bk: Deposits at INR 1.12 tln as on Dec 31, up 2% QoQ
--AU Small Fin Bk: Gross loans at INR 1.09 tln as on Dec 31, up 3.7% QoQ
--AU Small Finance Bank: CASA ratio at 30.6% as on Dec 31
--AU Small Fin Bk Oct-Dec fresh slippages INR 9.56 bln vs INR 7.36 bln qtr ago
By Siddhi Chauhan
MUMBAI – AU Small Finance Bank on Friday reported a 40.8% growth in its net profit for Oct-Dec, beating Street estimates. The bottom line was down 7.5% sequentially. At INR 5.28 billion, the net profit of the small finance bank was higher than the analysts' estimate of INR 5.03 billion.
To be sure, AU Small Finance Bank's numbers are not comparable to those from last year considering it merged with Fincare Small Finance Bank on Apr. 1. "The results for the quarter and nine months ended Dec. 31, 2024, include the operations of erstwhile Fincare Small Finance Bank. Hence, the results for the quarter and nine months ended December 31, 2024 are not comparable with those of the corresponding periods of the previous year," the bank said.
AU Small Finance Bank's asset quality weakened sequentially with the provisions and contingencies for the quarter ended December rising 34.5% to INR 5.02 billion. The banks' gross non-performing assets ratio rose to 2.31% as on Dec. 31 from 1.98% at the end of September, while the net bad loan ratio increased to 0.91% from 0.75% a quarter ago.
Shares of AU Small Finance Bank ended 2.1% higher on Friday at INR 594.65 on the National Stock Exchange.
In the December quarter, the bank's net interest income rose 52.7% on year and 2.4% quarter-on-quarter to INR 20.23 billion, broadly in line with expectations of INR 20.34 billion as per the average of estimates of 10 brokerages, on the back of a 3.7% on-quarter growth in gross loans to INR 1.09 trillion. Secured loans, which make up 90% of the portfolio, were up 5.1% from the previous quarter.
On the deposit side, AU Small Finance Bank's total deposits stood at INR 1.12 trillion as on Dec. 31, up 2% from the previous quarter. However, the current account and savings account ratio declined to 30.6% from 32.4% at the end of September. Cost of funds rose 2 basis points from Jul-Sept to 7.06% in Oct-Dec, with the bank guiding that the full-year figure will be "at the lower end of guidance of 7.10–7.15%".
With costs rising and the yield on gross advances slipping by 5 bps from Jul-Sept, the bank's net interest margin fell 23 bps to 5.9%. According to the bank, around 10 bps of the fall in the margin is explained by a rise in the investment book, while a hit of 9 bps came from the higher cost of funds and lower income. A final 4 bps decline in the margin was due to interest reversal on slippages.
On the asset quality front, AU Small Finance Bank saw an increase in its credit cost in Oct-Dec to 0.36% from 0.28% in Jul-Sept, with fresh slippages rising to INR 9.56 billion from INR 7.36 billion in Jul-Sept and INR 4.03 billion in the final quarter of 2023.
"Bank's credit cost for Q3'FY25 (Oct-Dec) stood at 0.36% of total average assets owing to stress in unsecured businesses (MFI and Credit Card) where the current environment remains challenging with customer over-leveraging being an industry-wide issue. This has been exacerbated by lower disbursement/base effect," the bank said in a release.
For the microfinance book, the gross NPA ratio was around 4.1% as on Dec. 31, the bank said, with 39% of the portfolio being customers having sole-lender relationship with AU Small Finance Bank. For Apr-Dec, the bank's credit cost was 1.52% of the average gross loan portfolio, with the bank guiding for a full-year figure of 1.5-1.6%. Its provision coverage ratio stood at 80% as on Dec. 31. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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