In This Article:
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Total Deposits: INR110,000 crores, a quarter-to-quarter growth of 12.7%.
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CASA Ratio: 32%.
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CD Ratio: 86%.
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Cost of Funds: Stable at around 7.04%.
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Loan Portfolio: INR105,000 crores, with a growth target of 25% for the year.
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Pre-Provision Operating Profit: Increased by 19% quarter-to-quarter.
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Profit After Tax: Increased by 14% to INR571 crores.
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Other Income: 32% of net interest income, up from 27% in quarter one.
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Cost-to-Income Ratio: Reduced from 61% in quarter one to 57% in quarter two.
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Credit Costs: 1.28% on GLP for the first half, expected to remain elevated.
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Return on Assets (ROA): 1.7% in quarter two and H1.
Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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AU Small Finance Bank Ltd (NSE:AUBANK) reported strong growth in deposits, crossing the milestone of INR1.5 lakh crores, with a quarter-to-quarter growth of 12.7%.
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The bank's CASA deposits grew by 11% quarter-to-quarter, maintaining a healthy CASA ratio of 32%.
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Profitability improved with pre-provision operating profit increasing by 19% quarter-to-quarter and profit after tax rising by 14%.
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The bank's cost-to-income ratio improved from 61% in Q1 to 57% in Q2, driven by higher efficiency and cost control.
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AU Small Finance Bank Ltd (NSE:AUBANK) is leveraging its distribution network and increasing product coverage, with plans to expand its wheels and MBL offerings to more touchpoints by the end of the financial year.
Negative Points
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The operating environment remains challenging due to high inflation, election cycles, and adverse weather conditions, impacting the informal customer segments.
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Credit costs in unsecured segments, particularly in microfinance and credit cards, are elevated and expected to remain high in the second half of the year.
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The bank's gross NPA in secured assets saw an uptick due to seasonality and weather-induced challenges.
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The microfinance segment, which constitutes 7% of the bank's book, is experiencing asset quality issues due to industry-wide customer overleveraging.
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The bank's LCR ratio is at 112%, which may need improvement in light of potential regulatory changes.
Q & A Highlights
Q: How confident is AU Small Finance Bank in sustaining its margins given the current interest rate environment? A: Sanjay Agarwal, CEO, mentioned that the bank expects to maintain its Net Interest Margin (NIM) around 6%, despite the absence of rate cuts until March 2025. This confidence stems from a reduction in the cost of funds and better yields on assets, particularly in segments like wheels, MBL, housing, and gold loans.