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AU Small Finance Bank Limited — Q3 FY24
AU Small Finance Bank reported Q3 FY24 results in line with expectations, with balance sheet crossing INR 100,000 crore and deposits growing 31% YoY to over INR 80,000 crore.
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AU Small Finance Bank reported Q3 FY24 results in line with expectations, with balance sheet crossing INR 100,000 crore and deposits growing 31% YoY to over INR 80,000 crore. Loan book (gross of securitization) crossed INR 75,000 crore. Net interest margin contracted 6 bps QoQ to 5.5% due to elevated cost of funds (up 20 bps QoQ). Credit cost normalized to 62 bps, with credit card book contributing 18 bps. Gross NPA rose 7 bps to 1.98% partly due to securitization and seasonal collection disruptions from state elections. Management emphasized deposit-led growth strategy and investments in credit cards, digital, and brand. Merger with Fincare received CCI approval; final RBI approval awaited. Guidance: NIM at lower end of 5.5% for FY24; credit card breakeven expected by FY25-end. Risk: Rising credit costs from unsecured books (credit card, MFI post-merger) could pressure profitability if not offset by higher yields.
AU स्मॉल फाइनेंस बैंक ने तीसरी तिमाही के नतीजे उम्मीद के मुताबिक पेश किए। बैंक का कुल कारोबार 1 लाख करोड़ रुपये से ज्यादा हो गया। जमा में सालाना 31% का इजाफा हुआ और यह 80,000 करोड़ रुपये से ऊपर पहुंच गया। कर्ज (बेचे गए कर्ज को छोड़कर) 75,000 करोड़ रुपये पार कर गया। ब्याज कमाई का अंतर (NIM) थोड़ा घटकर 5.5% रह गया, क्योंकि बैंक को जमा पर ज्यादा ब्याज देना पड़ा। खराब कर्ज (NPA) थोड़ा बढ़कर 1.98% हो गया, जिसकी वजह चुनावों के दौरान वसूली में रुकावट थी। बैंक जमा बढ़ाने और क्रेडिट कार्ड व डिजिटल सेवाओं पर ध्यान दे रहा है। फिनकेयर के साथ विलय को मंजूरी मिल गई है, अब RBI की मंजूरी का इंतजार है। उम्मीद है कि क्रेडिट कार्ड का कारोबार अगले साल तक मुनाफे में आ जाएगा। लेकिन क्रेडिट कार्ड और छोटे कर्ज से खराब कर्ज बढ़ने का खतरा है।
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Elevated credit cost on credit card book
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Deposits
INR 80,000 crore
+31% YoY
Total deposits crossed INR 80,000 crore, driven by retail and CASA growth.
CASA Ratio
33%
flat QoQ
CASA ratio stable at 33%; CASA plus retail term deposits at 64% of total deposits.
Credit Card Base
8.3 lakh cards
+20% QoQ (approx)
Credit card portfolio grew to 8.3 lakh cards; launched co-branded card with ixigo.
Securitization Book
INR 8,500 crore
+INR 2,700 crore QoQ
Securitized INR 2,700 crore in Q3; total securitization book reached INR 8,500 crore.
What Changed vs Last Quarter
NEW
NIM for FY24 at lower end of 5.5%
Management guided that full-year NIM will be at the lower end of 5.5%, considering cost of funds pressure and securitization income recognition.
NEW
Credit card breakeven by FY25-end
Management expects credit card business to break even by the last quarter of FY25, as the book seasons and term book builds.
NEW
Loan growth of 26-27% by March 2024
Sanjay Agarwal guided that on-book loan growth will be around 26-27% by end of FY24, partly due to base effect.
NEW
Investment spend on new businesses to continue at similar run-rate
Operating expenses for credit cards, QR, and video banking will remain elevated with ~55-60% growth in these cost heads next year as well.
DROPPED
Full-year loan growth of 25-26%
Management guided for on-balance sheet advances growth of 25-26% for FY24, driven by liability growth.
DROPPED
NIM within guided range for FY24
NIM of 5.5% in Q2 remains within the guided range for the full year, despite structural pressure.
DROPPED
Cost-to-income ratio similar to FY23
Full-year cost-to-income ratio expected to land similar to last financial year, despite investments.
DROPPED
MFI book to be ~10% of balance sheet post-merger
Post-merger, MFI will be 8% of balance sheet, intended to be kept around 10% going forward.
NEW RISK
Elevated credit cost on credit card book
Credit card credit cost is currently ~6-6.5% annualized, higher than industry steady-state, and may not normalize until the book reaches larger scale.
NEW RISK
Margin pressure from rising cost of funds
Cost of funds increased 78 bps in 9M FY24 and 20 bps QoQ; NIM contracted 6 bps QoQ to 5.5%. Further hikes could compress margins.
NEW RISK
Post-merger integration and MFI credit risk
Fincare merger adds MFI book with ~3% expected credit cost; integration and asset quality management remain key risks.
NEW RISK
High NTB credit card issuance may lead to adverse selection
75% of credit cards issued to new-to-bank customers with average limit of INR 1.74 lakh, which could result in higher delinquencies as the book seasons.
RISK GONE
Integration challenges from merger
Merging with Fincare adds 15,000 employees and 1,300 touchpoints; cultural and operational integration could distract management.
RISK GONE
MFI credit cost cyclicality
MFI business has inherent cyclicality with credit costs spiking every 3-5 years; management plans conservative provisioning but risk remains.
RISK GONE
Sustained margin compression
NIM declined to 5.5% due to structural mix shift and rising deposit costs; further pressure expected if competition intensifies.
RISK GONE
Deposit franchise pressure
CASA ratio declined 4pp since March; tight liquidity and high competition may keep cost of funds elevated.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q2 FY24
Full-year cost-to-income ratio expected to land similar to last financial year, despite investments.
Fast read
Guidance and risk preview
Management guided that full-year NIM will be at the lower end of 5.5%, considering cost of funds pressure and securitization income recognition.
Credit card credit cost is currently ~6-6.5% annualized, higher than industry steady-state, and may not normalize until the book reaches larger scale.
View Risks →