AU Small Finance Bank
conducted conference call on 25 April 2023 to discuss its financial results for
the quarter ended March 2023. Sanjay Agarwal, MD&CEO of the bank addressed
the call:
Highlights:
The bank recently celebrated
28 years of its presence and 6 years of banking operations.
The bank has fulfilled all
its commitment shared during road shows for capital raising last year. The
business has grown at 30%. The bank has continued to deliver sustainable RoE
and RoAs. The bank is serving more than 38 lakh customers. The RBI approval for
reappointment of MD for 3 years indicates at strong governance.
Bank has raised the share of
Casa and retail deposits to 69% end March 2023.
The net interest margin of
the bank has been impacted due to rising deposit rates which are yet to reach
peak level.
Also the significant loan book
of the bank is fixed rate which impacts margin in the rising interest rates scenario.
However, the share of fixed rate loan book has declined to 66% of loan book end
March 2023 from 73% end March 2022. The bank expects to reduce share of fixed
rate loans to 50% in next three years.
The margins are likely to
remain under pressure and may moderate by 30-40 bps in FY2024.
The share of commercial
banking loans and affordable housing loan book is rising which has lower yields
but the credit cost and opex is low. So it has a similar RoA is compared with
the other retail businesses.
With the continuing investment
the cost to income ratio remained elevated. The bank expects these investments
will start generating higher revenues by the year end.
Credit cards business is
expected to break even in next 1 year.
The bank focus is on
building a strong brand and that will enable in strengthening trust among
customers. The focus will be also on strengthening deposit franchise, invest in
innovation, strong HR practices etc.
Strong collection efforts have
helped to maintain gross NPA below Rs 1000 crore and net NPAs low at 0.42% end
March 2023.
Bank issued more than one
lakh credit card in FY23 taking the cards base 5 lakh. The monthly cards issuance
has increased to more than 15 thousands.
The favorable tax order has resulted
in a tax reversal.
The RBI has granted the bank
an AD - 1 license which is expected to help the bank to acquire new customers.
The bank added 108 branches in
FY2023.
The bank expects the small
business loan book to grow by 20-21%. The overall loan growth is expected to around
28%.
Within the vehicle finance
book, the personal car share was 40%, taxi 12%, tractor 10% and two-wheeler 2%.
The bank expects to maintain
RoA in the range of 1.8-2% going ahead.
The ratio of fee income to
average assets is expected to improve over the next few years from existing 1.3-1.4%.
The credit cost is
expected to remain below normalized levels in FY24.
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