Earnings Review
Equitas Small Fin's PAT slumps as provisions rise 2.5 times
This story was originally published at 18:12 IST on 30 April 2025
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--Equitas Small Fin Bank Jan-Mar net profit INR 421.08 mln
--Analysts saw Equitas Small Fin Bank Jan-Mar net profit INR 685 mln
--Equitas Small Fin Bk Jan-Mar net profit INR 421.08 mln vs INR 2.08 bln
--Equitas Small Fin Bk Jan-Mar total income INR 18.69 bln vs INR 16.85 bln
--Equitas Small Fin Bk Jan-Mar provisions INR 2.58 bln vs INR 1.07 bln
--Equitas Small Fin Bk FY25 net profit INR 1.47 bln vs INR 7.99 bln yr ago
--Equitas Small Fin Bk FY25 total income INR 72.23 bln vs INR 62.85 bln
--Equitas Small Fin Bk gross NPA ratio at 2.89% Mar 31 vs 2.97% qtr ago
--Equitas Small Fin Bk net NPA ratio at 0.98% Mar 31 vs 0.96% qtr ago
--Equitas Small Fin Bk Basel-III capital adequacy ratio at 20.60% Mar 31
--Equitas Small Finance Bank Jan-Mar NIM at 7.13%
--Equitas Small Fin Bk liquidity coverage ratio at 200.96% as on Mar 31
--Equitas Small Fin Bk provision coverage ratio at 82.01% as on Mar 31
--Equitas Small Fin Bk gross advances at INR 379.86 bln Mar 31, up 11% YoY
--Equitas Small Fin Bk Jan-Mar disbursements at INR 42.67 bln, dn 16% YoY
--Equitas Small Fin Bk Jan-Mar recoveries, upgrades INR 2.59 bln
--Equitas Small Fin Bk wrote off loans worth INR 2.99 bln in Jan-Mar
--Equitas Small Fin Bk total deposits at INR 431.07 bln Mar 31, up 19% YoY
By Siddhi Chauhan
MUMBAI – Equitas Small Finance Bank's net profit for the March quarter fell sharply on year as provisions more than doubled. Contraction in the net interest margin also weighed on the lender's profit. The fall in net profit was sharper than what analysts had estimated. The bank's net profit was down nearly 80% on year at INR 421.08 million. Analysts tracking the lender were seeing its net profit at INR 685.00 million.
Provisions maintained by the lender in the Jan-Mar quarter rose sharply by 142% on year to INR 2.58 billion. As of Mar. 31, the bank's provision coverage ratio was 82.01%, up from 80.33% a quarter ago and sharply higher than 66.51% a year ago.
Fresh slippages reported by the bank rose to INR 5.55 billion, from INR 3.56 billion a year ago. Net slippages stood at INR 2.95 billion, higher than the net slippages of INR 2.84 billion reported a quarter ago. The microfinance segment accounted for INR 1.72 billion of the net slippages, and the non-microfinance book accounted for INR 1.23 billion. Recoveries and upgrades in the reporting quarter were at INR 2.59 billion, while the bank wrote off loans amounting to INR 2.99 billion.
"MFI net slippages show signs of improvement in Q4FY25 (Jan-Mar) on account of high upgradations during the quarter," the bank said in a presentation for investors. "Non-MFI book witnessed an uptick due to one account (INR 330 million) which was present in Q2FY25 (Jul-Sept), moved out in Q3FY25 (Oct-Dec), and slipped back in Q4FY25."
The gross non-performing asset ratio improved to 2.89% as of Mar. 31 from 2.97% a quarter ago. However, the net non-performing asset ratio rose slightly to 0.98% as of Mar. 31, from 0.96% a quarter ago.
Though there was a sharp year-on-year fall in the bank's net profit, the lender's total income rose 10.9% on year to INR 18.69 billion, mainly because of a rise in interest earned. In the March quarter, interest earned rose by 13.8% on year to INR 16.44 billion. For the financial year 2024-25 (Apr-Mar), Equitas Small Finance Bank's total income stood at INR 72.23 billion, up nearly 15%, with the net profit down nearly 82% at INR 1.47 billion.
The bank's net interest margin declined by more than a percentage point on year to 7.13%. On quarter, the fall was 26 basis points. The net interest margin fell because of a decline in lending to the microfinance segment, the bank said. Many banks have tried to shift their portfolios from the microfinance segment to other segments due to the continuing stress in the former. This has caused banks across the industry to maintain higher provisions. "We are focusing on growth in secured loans with comparable yields to microfinance e (like Micro LAP, Used Vehicle loans) to support margins. The volatility in portfolio quality should reduce going forward." the presentation said.
The bank's loans to the microfinance segment in Jan-Mar fell 28% on year to INR 45.27 billion. In the December quarter, advances to this segment were INR 53.70 billion. Small business loans, which account for a major portion of the bank's total advances, rose 25% on year to INR 163.83 billion in the March quarter.
The bank's advances for vehicle finance and housing finance rose 14% on year to INR 94.56 billion and INR 47.69 billion, respectively. Vehicle finance accounted for 25% of the bank's loan portfolio and housing finance accounted for 13%. The bank's gross advances rose 11% on year to INR 379.86 billion in the March quarter. Disbursements in the quarter rose by 16% on year to INR 42.67 billion.
Deposits grew by 19% on year to INR 431.07 billion as of Mar. 31. The bank's current account savings account ratio stood at 29%, down from 32% a year ago. Its cost of funds rose to 7.54% in the March quarter, from 7.44% a year ago. The increased cost of funds also had a bearing on the bank's net interest margins.
The bank's Basel-II capital adequacy ratio was 20.60% as of Mar. 31. The liquidity coverage ratio stood at 200.96% as of Mar. 31. On Wednesday, shares of Equitas Small Finance bank ended 2.9% lower at INR 66.95 on the National Stock Exchange. End
Edited by Rajeev Pai
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