AU Small Finance Bank (SFB) reported an increase of 3.5% year-on-year in PAT to Rs 120 crore (our estimate: Rs 180 crore), affected by higher provisions of Rs 150 crore. This was attributed to the bank creating additional provisions of Rs 138 crore to cushion the impact of Covid-19 on accounts in default but standard. NII grew 43% y-o-y (+10% q-o-q) to Rs 550 crore (our estimate: Rs 510 crore), while the margin came in stable q-o-q at 5.5%. Other income grew 40% y-o-y to Rs 180 crore, led by higher PLC income and stake sale in Aavas (Rs 8.7 crore).
Opex grew 40% y-o-y (+18.9% q-o-q) to Rs 420 crore. The C/I ratio increased 400 bps q-o-q to 57.2%. PPoP grew 46% y-o-y to Rs 320 crore (our estimate: Rs 280 crore). The bank’s gross AUM grew 27% y-o-y to Rs 30,700 crore, led by retail AUM rising 28% y-o-y. The share of retail AUM increased to 84% v/s 78% in FY19. Disbursements grew 16% y-o-y for FY20, led by a 27% y-o-y rise in retail assets.
SBL MSME disbursements grew 32% y-o-y and wheel disbursements 16% y-o-y, driven by the Used and Cash-on-wheels segments. Small and mid-corporate assets de-grew 16% y-o-y. Deposits grew 35% y-o-y to Rs 26,160 crore. The CASA ratio (excluding Certificate of Deposits) stood at 16%. Absolute GNPL/NNPL declined 9.2% q-o-q/19.0% q-o-q. Thus, the GNPA and NNPA ratios declined 20 bps each to 1.7% and 0.8%, respectively. PCR, thus, increased ~570bp to 52.5%.
The Tier 1 ratio improved to 18.4% (CAR at 22.0%) and AUM IRR came in stable at 14.7%; COF declined further to 7.45% v/s 7.6% in Q3FY20.
AU SFB reported a steady operating performance; however, Covid-19 provisions have dented earnings. While reported asset quality ratios have all improved, the collection efficiency has seen a decline. We await clarity on overdue loans/books under moratorium and the growth outlook. However, deposit growth has held strong. This, along with other measures, has enabled the bank to maintain strong surplus liquidity and LCR of 133%. We would revise our estimates and TP following the earnings call.