The bank said that the NII growth was aided by stable spreads and healthy disbursements.

Operating expenses jumped 51% to Rs 832 crore in Q2 FY23 from Rs 553 crore in Q2 FY22.

PPOP in Q2 FY23 was Rs 499 crore, up by 27% from Rs 392 crore in Q2 FY22.

Provisions surged to Rs 43 crore in the second quarter from Rs 5 crore recorded in the same period last year.

Profit before tax in Q2 FY23 stood at Rs 456 crore, up by 18% from Rs 388 crore in Q2 FY22.

Cost to income for Q2 FY23 declined 277 bps to 62.5% from 65.3% in Q1 FY23.

"Inflationary pressures and high interest rate remain key risk for opex in the current environment,” the bank said in a statement.

On the asset quality front, the bank's gross non-performing assets (NPAs) stood at Rs 997 crore as on 30 September 2022 as against Rs 970 crore as on 30 June 2022 and Rs 1,151 crore as on 30 September 2021.

Gross NPA improved to 1.90% of gross advances as on 30 September 2022 as against 1.96% as on 30 June 2022 and 3.16% as on 30 September 2021.

Net non-performing assets (NPAs) were 0.56% of net advances as on 30 September 2022 as compared to 0.56% on 30 June 2022 and 1.65% as on 30 September 2021.

Provision coverage ratio was consistent at 71% as at 30 September 2022 as 49% as on 30 September 2021.

Deposits grew by 7% QoQ to Rs 58,335 crore while gross advances grew by 6% QoQ to Rs 52,452 crore as on 30 September 2022. The bank said that 90% of loan book is retail in nature and 93% remains secured.

Capital adequacy remains healthy at Tier 1 of 22.6% and CRAR of 24.7% after adding interim profits.

The bank said that Q2 FY23 saw a challenging macro environment where the outlook remained uncertain with risks arising from geo-politics, persistent inflation and hardening of interest rates globally. Domestically as well, liquidity tightened significantly, and inflationary pressures continued leading to hardening of interest rates. However, the domestic demand held up well and the overall credit environment in the Indian banking sector was resilient during the quarter.

Sanjay Agarwal, MD & CEO, AU Small Finance Bank, said, “The operating environment in Q2 FY23 saw uncertainty over inflation, liquidity and rates intensify significantly which continues to be the case. While the domestic outlook is encouraging, the possibility of a lagged impact of these factors on demand and activity levels can't be ignored and we are watchful.

Within this context, the bank delivered a strong operating performance for Q2 FY22 and made progress on all key parameters - retail deposit mobilization, credit growth across all lending verticals, and sustained acquisition and engagement in digital products. Collection efficiencies remained strong resulting in robust asset quality performance.

Further, the balance sheet was fortified by raising capital of Rs 2,500 crore in the form of Rs 2,000 crore of equity capital and Rs 500 crore in Tier 2 capital which makes us even more resilient amid this uncertainty, and well prepared to capture growth opportunities.”

AU Small Finance Bank (AU Bank) is a scheduled commercial bank. As on 30 September 2022, the bank has established operations across 980 banking touchpoints while serving 33.3 Lakh customers in 20 states & 2 union territories.

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