AU Small Finance Bank FY25 Annual Earnings Summary
3 quarters covered · ₹0 Cr revenue · ₹3,205 Cr PAT · 0.0% average EBITDA margin.
Quarter-by-quarter progression
Management promises made during the year
Promise tracking available after 2+ quarters of coverage.
Risks flagged during the year
MFI portfolio (7% of book) is experiencing industry-wide stress; credit cost in H1 was ~3.5% and may rise further if economic recovery falters.
Q3 FY25 · highMFI credit cost of 5.4% annualized YTD and elevated SMA pool of 4.4% may persist for 2-3 quarters, impacting overall profitability.
Q3 FY25 · highCredit card book declined 9% QoQ with credit cost of 9.2% YTD; corrective actions may take 1-2 quarters to show results.
Q2 FY25 · mediumCredit cost in unsecured book was ~8.5% in H1 vs guided 6.5%; management expects elevated levels in H2 as well.
Q2 FY25 · mediumSlippages in secured retail (67% of total) were higher than expected due to weather and election impact; recovery depends on economic pickup.
Q3 FY25 · mediumTight banking system liquidity and persistent inflation may keep cost of funds elevated, impacting NIMs.
Q3 FY25 · mediumAnalyst raised concern about sequential asset quality changes in secured book; management confident but GDP slowdown could affect informal segments.
Q4 FY25 · mediumWith 50 bps repo rate cut, 30% variable rate book will reprice down, while deposit costs may not fall as quickly, pressuring NIMs in H1 FY26.
Q4 FY25 · mediumDespite improving collection efficiency, the implementation of Anfin guardrails and typical Q1 seasonality could lead to elevated slippages in MFI.
Q4 FY25 · mediumManagement acknowledged that the credit card franchise will take 1-2 years to turn around, with breakeven expected only by FY27.
Q2 FY25 · lowDraft LCR circular could require higher liquidity; management has not yet assessed impact but noted ratio is comfortable for now.
Q4 FY25 · lowHome loan NPA has risen above 1% due to transition issues from the Fincare merger, though management expects it to normalize.
What changed through the year
Q2 FY25 · Full-year credit cost around 1.28% of loan portfolio
Management expects H2 credit cost to be broadly similar to H1, with a possible variance of 10-15 bps depending on economic conditions.
Q2 FY25 · Full-year cost-to-income ratio around 60%
Despite seasonally higher OpEx in H2, management expects cost-to-income to be ~60% for FY25, down from 63-64% last year.
Q2 FY25 · Full-year cost of funds in 7.10%-7.15% range
Revised down from initial 7.2-7.25% due to better deposit franchise and stable rates.
Q2 FY25 · Target ROA of 1.6% for FY25
Management aims to defend ROA at 1.6% despite elevated credit costs, supported by other income and cost control.
Q3 FY25 · FY25 loan growth of ~20%
Total loan portfolio expected to grow around 20% for FY25, with secured assets growing 23%-24% and continued degrowth in MFI and credit cards.
Q3 FY25 · FY25 cost-to-income ratio of 57%-58%
Full-year cost-to-income ratio expected to be 57%-58%, with Q4 seasonally higher expenses.
Q3 FY25 · FY25 ROA guidance of 1.6%
Despite elevated credit costs, the bank expects to be within striking range of 1.6% ROA for FY25.
Q3 FY25 · Cost of funds guided to 7.10%-7.15% for FY25
Even after recent rate hikes on savings and FD, cost of funds expected at lower end of guided range.
Q4 FY25 · Credit cost of 75-85 bps on total average assets over medium term
Management expects normalized credit cost to be in the range of 75-85 bps, with FY26 likely at the higher end (around 85 bps) due to residual stress in unsecured books in H1.
Q4 FY25 · MFI credit cost to improve to ~3.5% in FY26
MFI credit cost is expected to decline from elevated levels to around 3.5% in FY26, with normalization by H2.
Q4 FY25 · Credit card credit cost to be 6-7% in FY26
Credit card credit cost is expected to be in the range of 6-7% for FY26, down from ~12.5% in FY25, with H1 elevated and H2 normalizing.
Q4 FY25 · Universal banking license expected in calendar year 2025
Management expects the universal banking license to be granted within calendar year 2025, which will enable capital raising and branding initiatives.