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.
neutral
medium
✓ Verified against BSE filing
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.
33%Questions answered6Evaded / deflected12Questions audited
Answered
High priority
Verify credit card credit cost at 6.5% and outlook.
Asked by Bhavesh Kanani, ASK Investment Managers
Confirmed the number and gave context on stabilization trajectory.
Read the exchange
Question
Basis the disclosure of net credit cost and excluding credit card credit cost, those numbers essentially imply that probably your credit card business annualized credit cost is around 6.5%. I wanted to verify that, and if that is the case, where do we see it stabilizing?
Prince Tiwari (Head of Investor Relations)
So, Bhavesh, before Mayank... First, the number is confirmed. You're absolutely right, that broadly the credit cost on the credit card book in this quarter is in the range that you mentioned.
Partial answer
High priority
Thoughts on term deposit competition and liquidity.
Asked by Bhavesh Kanani, ASK Investment Managers
Acknowledged tough environment but gave qualitative commentary without specific outlook.
no specific forward guidance on deposit rates
Read the exchange
Question
The second was on the, you know, industry-level scenario on the term deposit and liquidity, as well as deposit mobilization in general. If Sanjay sir could share his thoughts on these aspects.
Sanjay Agarwal (Founder, MD & CEO)
Oh, yeah. So thank you, Bhavesh. So I think I commented on my narrative is just that this is a very tough environment. You know, liquidity is a challenge, but, overall, we have performed very well.
Partial answer
High priority
Normalized credit cost for AU post new products and MFI.
Asked by Renish Bhuva, ICICI Securities
Provided ranges but deferred full guidance to post-merger clarity.
deferred guidance to next year
Read the exchange
Question
But now, given we are entering new products, you know, with MFI coming in, what should be the normalized credit cost, you know, for AU, going ahead?
Sanjay Agarwal (Founder, MD & CEO)
So I think we would give you a better guidance by next April once we get entire thing in place. But I would say the you should assume that, you know, the normal AU book should give you that this kind of credit cost, which is 0.5%-0.6% range, and maybe 6%-7% range of credit cost of like credit cost, and of course, 3% on microfinance book.
Answered
Medium priority
Reason for higher securitization income this quarter.
Asked by Renish Bhuva, ICICI Securities
Explained the accounting change clearly.
Read the exchange
Question
But when we look at the income portion, you know, this quarter's, income is significantly higher, INR 180 crore odd versus, INR 75 crore odd. So what is, you know, what am I missing here?
Vimal Jain (CFO)
So as mentioned on slide number 19, our overall securitization book has been increasing... Now we have followed the matching principle to recognize both interest expenses and interest income in the same quarter to remove any lag impact.
Evasive
Medium priority
When will deposit strength reduce securitization need?
Asked by Kunal Shah, Citigroup
Did not answer when securitization would reduce; focused on deposit strategy.
no commitment on securitization reductionreframed to long-term strategy
Read the exchange
Question
So when do we see maybe, like, we are comfortable, and now maybe we should resort to a lesser amount of securitization because deposit growth has been quite strong?
Sanjay Agarwal (Founder, MD & CEO)
Kunal, very important question, but you know, very early days, you know, we have worked strongly on our deposit franchise... So I would say that, there is a narrative from the other stakeholders also, the whole regulatory framework also, where we, we need to calibrate our growth also, right?
Evasive
High priority
NIM pressure and full-year guidance lower end.
Asked by Kunal Shah, Citigroup
Avoided quantifying the margin impact and reiterated full-year guidance.
did not quantify margin pressuredeflected to overall management
Read the exchange
Question
So if we exclude this entire securitization income, would there have been the pressure on the margins to the extent of 30 odd basis points during the quarter? And then how comfortable we would be with maybe you have lowered the guidance and said, like, we will be at the lower end of 5.5 for the full year...
Sanjay Agarwal (Founder, MD & CEO) and Vimal Jain (CFO)
Of course, if you add on math, you know, the data which you are describing with you there, but, you know... We are running a bank, right? So there are many vectors that support us.
Partial answer
High priority
Credit card risk metrics seem aggressive; credit cost benign?
Asked by Shubhranshu Mishra, PhillipCapital
Explained limit and NTB but did not justify why credit cost is low given risk.
did not address credit cost benignity directlyfocused on limit comparison
Read the exchange
Question
This just seems out of whack. You know, the 75% issuance to new to bank customers, that's like very high... Basis that, the kind of credit cost that we are speaking of at around 5% or 6% looks absolutely benign. What's the case here?
Mayank Markanday (Head of Digital Bank AU 0101)
Yeah, Shubhranshu, I'll answer all your questions. I'll take the first question from the limit side. So, Shubhranshu, on the limit side, if you see, you must be comparing this limit with the average limit of the industry, whereas the industry portfolio has built in over a year...
Partial answer
High priority
Credit card yield vs home loan yield; return on capital?
Asked by Manish Shukla, Axis Capital
Acknowledged fee income but did not provide a clear return on capital analysis.
did not quantify return on capitalfocused on fee income and term book build
Read the exchange
Question
If I look at the segmental yield, the differential between your home loan yield and credit card yield is only 40 basis points. Capital allocation... I'm just thinking that from a return on capital perspective, how do you all thinking of card business?
Prince Tiwari (Head of Investor Relations) and Mayank Markanday
So, Manish, hi, this is Prince here. Now, of course, there is a large fee component in the entire credit card business, right? So while home loan only has a, you know, typically an NII business with some processing fee, credit card has a equally strong, fee business...
Evasive
Medium priority
When will standalone cost-to-income go below 60%?
Asked by Manish Shukla, Axis Capital
Did not provide a timeline for cost-to-income improvement.
no timeline givendeflected to long-term journey
Read the exchange
Question
On cost to income, your commentary suggested that FY 2025 cost to income will probably closer to where we are right now. When does the standalone bank cost to income...?
Sanjay Agarwal (Founder, MD & CEO)
Manish, I, you know, I can understand your question now. So I would say that that is why I'm saying to you that if you go back in the history of Indian banking, it's not easy to build bank, you know. It requires some patience...
Evasive
High priority
Credit card credit cost seems high on base-adjusted book.
Asked by Param Subramanian, Nomura
Avoided addressing the high base-adjusted credit cost directly.
did not address the 17-18% numberreframed to long-term industry norms
Read the exchange
Question
If you look at it from a base-adjusted book, you know, it looks like it's 17%-18%. So isn't that very high compared to our comfort levels?
Prince Tiwari (Head of Investor Relations)
Param, Param, just, just hold on. See... I think we have been talking about credit cards a lot, right? Just for everyone's benefit. We have very clearly articulated that credit card is a business, and everyone knows it, including yourselves.
Evasive
High priority
Should credit card growth moderate given rising credit costs?
Asked by Param Subramanian, Nomura
Avoided giving a direct answer on growth moderation.
did not answer whether growth will moderatereframed as liability strategy
Read the exchange
Question
Are we, like, still comfortable growing it at this pace, or should we, you know, as investors, be looking at a moderation in the pace going ahead?
Prince Tiwari (Head of Investor Relations)
No, fair question. Fair question. And in fact, this question was asked to us when the, you know, the entire circular also came up around, unsecured lending. Please understand, and, I mean, through you, I want to, you know, send this message or request everyone to understand that I am not... My credit card business is a liability business.
Evasive
High priority
ROA trajectory over next three years.
Asked by Madhuchanda Dey, MC Pro
Did not provide a ROA trajectory; deferred to future clarity.
deferred to post-mergerno specific ROA guidance
Read the exchange
Question
Given this entire context, how should we look at ROA trajectory in the next three years for the bank?
Prince Tiwari (Head of Investor Relations) and Sanjay Agarwal (Founder, MD & CEO)
Thanks, Madhu. And again... a long-term question where, probably it involves merger... So that's where we are again and again saying that allow us probably April quarter or this quarter, for us to come back with a more clearer strategy...