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Informist, Thursday, Jul. 10, 2025

By Priyasmita Dutta

NEW DELHI – A surge in provisioning is yet again expected to hit the net profit of Ujjivan Small Finance Bank Ltd. According to the average of the estimates of four brokerages, the small finance bank's net profit for the June quarter is expected to plummet nearly 70% on year to INR 927 million. On a sequential basis, the lender's net profit is estimated to rise over 11%.

Estimates for the Bengaluru-based lender's net profit are in the range of INR 548 million to INR 1.23 billion. The small finance bank is yet to announce the date on which it will detail its financial results for Apr-Jun. On Thursday, shares of the bank closed at INR 47.69 on the National Stock Exchange, up 0.3% from the previous close. The small finance bank's net profit for the March quarter was INR 834 million, down 75% from a year ago, due to a threefold rise in provisioning.

Kotak Institutional Equities expects provisions to nearly triple on year in the June quarter as well, to INR 2.80 billion. "We expect a sharp earnings decline of around 80% year-on-year, led by (a) sharp increase in provisions year-on-year," the brokerage said in a pre-earnings report. Emkay Global Financial Services also said that profitability of the lender will improve sequentially but higher provisions will keep overall earnings in check.

Brokerages had a divergent outlook on Ujjivan Small Finance Bank's asset quality, with Kotak expecting the bank's slippages to be similar to the June quarter of last year or marginally lower sequentially because of similar stress in microfinance segment. Emkay, on the other hand, sees slippages remaining high due to stress in Tamil Nadu and Karnataka regions. At the end of March, the small finance bank's net non-performing asset ratio was 0.49% and the gross NPA was 2.18%. Emkay sees the gross NPA at 2.2% as of June end.

Apart from higher provisions, moderation in the net interest margin is also expected to eat into the lender's net profit for the June quarter. Brokerages expect the bank's net interest margin to be in the range of 7.5-8.3% for the said quarter. Kotak estimates the net interest margin at 7.5%, followed by JM Financial Institutional Securities' estimate of 7.8%, and Emkay's estimate of 8.3%. Ujjivan's net interest margin for Jan-Mar was 8.3%, down from 8.6% in Oct-Dec.

The small finance bank's net interest income for the June quarter is seen slightly higher at INR 8.84 billion from INR 8.64 billion in Jan-Mar. On a year-on-year basis, it is seen down 6.1%. Estimates for net interest income range from INR 8.57 billion to INR 8.96 billion. "Net interest income is expected to decline as net interest margin will likely soften further," Kotak said. 

Analysts said the small finance bank "also runs a good chance to secure the universal banking licence" this year, which will be a major factor to look out for. The lender had submitted an application with the Reserve Bank of India for a universal bank licence in February.

Following are the Apr-Jun earnings estimates for Ujjivan Small Finance Bank based on reports from four brokerage firms in ascending order by the estimate of net profit:

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Edited by Nishant Maher

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