AU Small Finance Bank Limited — Q1 FY25
AU Small Finance Bank reported a steady Q1 FY25, with the board approving a universal bank application.
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Claim Ledger
Did management answer the analysts?
Every material analyst question, graded on whether management actually answered it — with the verbatim exchange and quantitative claims checked against filed numbers.
58%Questions answered2Evaded / deflected12Questions audited
Partial answer
High priority
Timeline for universal bank license application and balance sheet calibration.
Asked by Kunal Shah, Citigroup
Management gave a tentative timeline but no firm date, and deflected on balance sheet calibration.
no exact timeline givendeferred to future
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Question
So first question is on Universal Bank licensing application. Okay, so any timeline which you would want to suggest wherein we'll make that application? Okay, and secondly, maybe any kind of calibration on the balance sheet or regulatory requirement, which we can expect that bank will start building up, okay, through this entire application process?
Sanjay Agarwal, Managing Director and CEO
So, Kunal, we will, we'll be doing application as soon as possible, so I can't set the timeline today because we got the approval two hours back only. But team is on the job, you know, so we expect, you know, maybe in August only, we should be able to file.
Partial answer
High priority
Whether current ROA level is sustainable or can improve.
Asked by Kunal Shah, Citigroup
Management reiterated guidance but did not quantify potential upside or specific levers.
no specific levers quantifieddeferred to later quarters
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Question
So broadly, fair to assume that this will be the stable level of the ROAs, or are there any levers available to improve from here on through the fiscal?
Sanjay Agarwal, Managing Director and CEO
Kunal, I would say again, very early in the year, you know, this is just first quarter. Not much unknowns... we really want to stick to our earlier guidance that we should defend our last year ROA, which is 1.6, you know?
Partial answer
High priority
Risk to asset growth if deposit growth target is not met.
Asked by Renish Patel, ICICI Securities
Management acknowledged risk to NIM but did not provide specific contingency plans.
acknowledged risk but no specific mitigation
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Question
But do you foresee a risk to the asset growth if the deposit growth the way we want it to be, if that doesn't happen?
Sanjay Agarwal, Managing Director and CEO
I think good question. ... So I don't think the risk is there on the growth, you know. The risk may be on the, on the NIM, but and that is why we are creating our goal that, you know, our ROE should be in the range of 1.6, you know, so but even things can go back from here also.
Partial answer
Medium priority
Current provisioning pool on microfinance book and target of 3%.
Asked by Renish Patel, ICICI Securities
Management did not give the exact percentage of provisioning pool initially, but later provided a number.
no exact percentage given initiallylater provided provision amount
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Question
So at this point in time, whatever, provisioning pool we have on the NFI book, though we have a target to reach to 3%. So where do we stand today in terms of, that 3%?
Prince Tiwari, Head of Investor Relations
So, Renish, maybe I'll start and Rajeev Ji will just complement... we have started that process now, right? We have taken it, we haven't waited for the year, but we have started doing it from the first quarter itself.
Answered
High priority
Reason for increase in disbursement yields and asset quality implications.
Asked by Nitin Aggarwal, Motilal Oswal
Management directly answered both parts with specific reasoning and reassurance.
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Question
So has competitive intensity come down, which is now enabling us to increase the yields? And do you see any implications of this from asset quality perspective, as system in general is witnessing some rise in delinquencies?
Sanjay Agarwal, Managing Director and CEO
Nitin, my whole assessment is that the market, the intensity has gone down because the rate has gone up... I don't think that this will eventually will go and you know, hit our asset quality, you know.
Answered
Medium priority
Strategy on gold loan yields and credit card yield increase drivers.
Asked by Nitin Aggarwal, Motilal Oswal
Management provided specific yield numbers and explained drivers for both segments.
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Question
So what will be the, say, the strategy on the gold loan in terms of yields and the growth now? And on credit card, has the revolve rate increased to drive this kind of yield increase?
Rajeev Yadav, Deputy CEO; Mayank Markanday, Head of Credit Cards
Basically, our gold book was, you know, Sanjay explained it quite clearly, was about a 16.2%-16.4% rate... On the credit card side, mainly the yields are increased due to increase in our term book.
Answered
Medium priority
Regulator's view on CD ratio adjusted for refinancing vs. gross CD ratio.
Asked by Prakhar Agarwal, Elara Capital
Management clearly explained their internal metric and regulatory stance.
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Question
In your mind, when you have a discussion with the regulator, do you look at CD ratios adjusting for refinancing as you highlighted, or it's just the outside CD ratio that is getting calculated in your discussion with the regulator?
Sanjay Agarwal, Managing Director and CEO
So Prakhar, the regulator has the specified CD ratio definition, but we as a bank always want to be very prudent on that side that refinance assets... So for me, that is the real CD ratio, and that is why I commented that we are at 84%.
Answered
Medium priority
Cost of deposits breakdown and behavior over the quarter.
Asked by Prakhar Agarwal, Elara Capital
Management provided specific cost of fund numbers and breakdown by product.
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Question
Can you also elaborate about the cost of deposit, how that has behaved over the quarter?
Shoorveer Shekhawat, Head of Liabilities
So if you see that, you know, like we mentioned, it was 7.10, from the transition has moved from 7.10 to 7.03. However, if you want to see, understand the savings account and, you know, term deposit differentiation...
Evasive
High priority
Asset strategy changes if universal banking license is obtained.
Asked by Rohan Mandora, Equirus Securities
Management declined to provide specifics, deferring to a future date.
deferred to futureno specific answer
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Question
So, sir, hypothetically, if you were to get the Universal Banking License in the next six to nine months, just want to understand from the bank's perspective, how would we look at the asset strategy?
Sanjay Agarwal, Managing Director and CEO
So I think the entire strategy will be discussed and then will be put in the application. So I think we should wait for another maybe three to four weeks to really come out clearly on this agenda.
Evasive
Medium priority
Distribution strategy post universal bank license.
Asked by Pritesh Bumb, DAM Capital
Management again deferred to a future date without providing any specifics.
deferred to futureno specific answer
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Question
So on the, distribution side, now we are present almost pan-India. So once you, become, a universal bank, what will be the strategy in terms of, your distribution?
Sanjay Agarwal, Managing Director and CEO
Pritesh, again, I want to be honest here that we should wait for another maybe three to four weeks to have a clear-cut strategy on it.
Partial answer
Medium priority
Sustainability of incremental yield of 15.8%.
Asked by Nidhesh Jain, Investec India
Management expressed intent to sustain but acknowledged potential seasonal variations.
acknowledged possible variationno firm commitment
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Question
Firstly, on the incremental yields, so 15.8% that you reported this quarter, do you think that is a sustainable number going forward?
Sanjay Agarwal, Managing Director and CEO
Nidesh, I think we did mention on the presentation as well that the endeavor would be to sustain it, right? Of course, it's the first quarter. Going ahead, we'll have some festive seasons in Q4, so there might be few bits here and there.
Partial answer
High priority
Confidence in credit cost guidance of 1.1% and ROA of 1.6%.
Asked by Param Subramanian, Nomura
Management expressed confidence but did not provide specific data to support the guidance.
acknowledged unknownsno specific data
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Question
So, how confident are we that, you know, this number will roll off? Because considering, you know, the credit costs or the write-offs we are seeing, you pointed out is in segments like credit card, MFI, where we are seeing, you know, the trend line moving upwards, right?
Sanjay Agarwal, Managing Director and CEO
So I'm confident, you know, of course, there are, there may be some unknowns, variables which we do not know as of now, but our track record says, our overall calculation says that, and being in secure asset mode...