AU Small Finance Bank conducted a conference call
on 24 April 2024 to discuss its financial results for the quarter ended March
2024. Sanjay Agarwal, MD&CEO of the bank addressed the call:
Highlights:
The bank has sustained its
growth momentum amidst a challenging macroeconomic landscape characterized by
elevated interest rates and intense competition for deposit mobilization.
The deposits of the bank
increased 26% and advances moved up 25% in FY2024.
The recent amalgamation of
Fincare SFB into AU Small Finance Bank positions the institution for enhanced
scale and efficiency. Post merger, the bank has 2,383 physical touchpoints
across India.
The margins are broadly in guided
range and asset quality continuing to be robust.
The bottomline of the bank
was impacted by one-off charges towards stamp duty and other
transaction-related expenses of Rs 57 crore in Q4FY2024.
The bank expects the cost of
funds to rise by 40-45bp in FY25 causing pressure on margins.
The bank will not undertake any
significant new platform-building investments until 2027.
An incremental cost of funds
fell 4 bps to 7.71% in Q4FY24, while incremental disbursement yields rose 8 bps
to 13.56%. The disbursement yields increased 39 bps in FY2024 as against 84 bps
jump in cost of funds.
The microfinance loan book
accounted for 8.3% of the loan book of merged entity.
The bank has assigned loans
amounting to Rs 620 crore in Q4FY24 and overall securitized loan book stood at
Rs 8180 crore end March 2024. The loan book growth including securitized book
was higher at 28%.
The share of CASA deposits
stood at 33% and CASA + retail TD was at 64% end March 2024.
The focuss will be on SME,
vehicle and microfinance loan segments. With yield on microfinance loans higher
at 25%, the bank expects its overall yield to increase ahead.
The credit cost stood at
0.59% in FY24, while the credit cost of the merged entity would be 70-75 bps on
total assets and 100-120 bps on total advances.
The standard restructured loan
book of the bank stood at 0.6% of gross advances end March 2024..
The bank would provide for credit
cost of 2.5-3.0% on the microfinance loan book, while any unutilized portion of
credit cost would be used to create a countercyclical buffer.
The bank targets to improve RoA
to 1.8% by FY27. The RoA for FY25 is expected to be at 1.6%.
The bank aims to raise the share of higher RoA
businesses from 70% to 72-75%.
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