AU Small Finance Bank Limited — Q4 FY24
AU Small Finance Bank reported a strong Q4 FY24 with gross loan portfolio growth of 28% YoY to ~INR 82,000 crore and deposit growth of 26% YoY crossing INR 87,000 crore.
bullish
high
✓ 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.
79%Questions answered0Evaded / deflected12Questions audited
Answered
High priority
Steady state credit cost for merged entity after one-time MFI provision
Asked by Renish Patel, ICICI
Management gave specific numeric ranges for credit cost on advances and total assets.
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Question
After factoring that one-time impact, what should be the steady state credit cost for a merge entity, sir, given our standalone credit cost has already been normalized to 70 basis point, including credit card cost of INR 45 crore?
Prince Tiwari (Head of Investor Relations)
I think anything about 1%-1.1% on overall advances and anything around about 70-75 basis points on total assets is where we should work with.
Partial answer
High priority
NIM outlook for FY25 given cost of funds increase
Asked by Renish Patel, ICICI
Management did not give a NIM number but shifted to ROA target and qualitative margin defense.
no specific NIM guidance givenreframed to ROA target
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Question
So considering that we still believe that there could be a cost of funds increase by 40-45 basis points in FY25, so does that lead to further NIM contraction from Q4 exit level, or let's say we have some leeway to sustain the NIM in FY25?
Prince Tiwari (Head of Investor Relations) and Sanjay Agarwal (CEO)
On a merger basis, our endeavor would be to protect the margins on the overall level for next financial year, at least. ... we want to defend 1.6 ROA next year too.
Answered
Medium priority
Integration expenses and net worth after merger
Asked by Kunal Shah, Citi
Management confirmed the net worth figure already includes merger expenses.
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Question
So firstly, when we look at it in terms of the integration expenses, what we have highlighted of INR 300-odd crore, so out of that, we mentioned INR 77 crore is stamp duty, another 50-60, which will be a BAU. And balance has been already taken care of by Fincare. And when we look at it, the net worth which is being given at 2,421 on the merged basis, that is after taking into account those merger-related expenses?
Prince Tiwari (Head of Investor Relations)
Yes. Yes, yes, Kunal. Yes.
Answered
Medium priority
Levers to improve ROA besides Fincare and OPEX
Asked by Kunal Shah, Citi
Management provided specific levers: retail asset ROA improvement and branch efficiency via CAR increase.
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Question
But besides this, where could we see the levers in terms of what we are seeing, say, credit card? Let's say a drag of almost 27 odd basis points. And I think regulatory drag would also continue. So would there be any other levers besides Fincare out there and the OPEX out there, or if we just look at this particular slide, which is there, yeah, on 37?
Sanjay Agarwal (CEO)
I believe that retail asset ROA will go up. ... The second lever, which I strongly believe, is this that the branch banking has to be more efficient and profitable by building CAR because our CAR is around 5%, right? And even if we increase it by 1%, right, it saves us a lot of money.
Partial answer
High priority
Credit card business drag on P&L and profitability outlook
Asked by Nitish Bhanushali, Investec
Management did not provide the requested quarterly drag number but gave qualitative outlook and issuance cap.
no specific P&L drag number for Q4 givendeferred profitability timeline
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Question
Firstly, on credit card business, if you can spell out the drag on P&L that the credit card business has had in this quarter, which you have shared in the analyst feed for nine months, that would be useful. How should we think about the profitability of credit card portfolio over next year and subsequent years?
Prince Tiwari (Head of Investor Relations) and Mayank Markanday (Head of Credit Cards)
We'll not be issuing more than 600,000 credit cards this year too. ... difficult to assess when it will become profitable or when we'll achieve the break-even. But I think one thing is sure that for next two years, it's not getting profitable.
Partial answer
Medium priority
Incremental yields on housing and microbusiness loans
Asked by Nitish Bhanushali, Investec
Management gave a yield data point for MBL in South but not for home loans, and discussed strategy instead.
no specific yield data for home loansreframed to strategy shift
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Question
But in housing loan and microbusiness loans, the incremental at least the on-book yields have not changed for last three, four quarters. So any data point on how the incremental yields are behaving in these two portfolios, microbusiness loan and home loans?
Prince Tiwari (Head of Investor Relations)
After acquiring Fincare, so in South market, we have seen that on MBL business, that team do around 18% kind of yield. So we really want to focus more in South market through the Fincare unit because MBL is more competitive in North nowadays.
Answered
Medium priority
Yield adjustments made in products and room for further hikes
Asked by Prakhar Agarwal, Elara Capital
Management provided specific yield increase data for vehicle and home loan businesses.
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Question
First, in terms of yields, if you could just highlight if any of the yield adjustments that you have made in several products that you probably made a mention that you are trying to adjust to reach few yields. So any?
Bhaskar Karkera (Head of Retail Secured Assets) and Mayank Markanday (Head of Credit Cards)
Just the Q3 of FY and the Q4 of FY, we have an incremental of 27 bps on the rate purely just in the ... vehicle business. ... In the HL business also, we have been able to increase it by 20 bps.
Partial answer
Medium priority
Sustainability of strong fee income growth
Asked by Nitin Aggarwal, Motilal Oswal
Management gave a qualitative assurance but no numeric fee growth target or breakdown.
no specific fee growth guidancequalitative only
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Question
So how sustainable, really, this is? Because fee intensity, if I just look at on a quarterly basis, on the total assets, it's already on the higher side. So how sustainable is this, and what further levers do you see going ahead in FY25?
Prince Tiwari (Head of Investor Relations)
I believe that there is only the sustainability is already on the table. It will be more firmed up in coming years.
Answered
High priority
Quarter-on-quarter margin walk from 5.5% to 5.1%
Asked by Param Subramanian, Nomura
Management explained the one-off securitization adjustment and provided adjusted margin figure.
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Question
So could you explain the quarter-on-quarter walk for the margin because the funding cost is only up 8 basis points? So we are seeing 5.5 go to 5.1. So if you could break that up for us, yeah.
Mayank Markanday (Head of Credit Cards)
Last quarter's margins had one-off impact from the securitization income, which we had taken for an additional month last quarter because of the matching principle that we followed. So it was one-time adjustment. ... The last quarter's margin should ideally be looked at as 5.3 after adjusting that.
Answered
Medium priority
Microfinance lending rate and impact of potential RBI yield cap
Asked by Manish Shukla, Axis Capital
Management gave the current yield and addressed the regulatory scenario directly.
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Question
What is the microfinance yield or the rate at which you are lending today? ... If RBI were to put any kind of a spread or yield cap, would you still be keen to take MFI to 10% of the book, or you would want to revisit it in that scenario?
Rajeev Yadav (Deputy CEO) and Prince Tiwari (Head of Investor Relations)
Our lending rates in microfinance are about 25% at this point of time. ... banks are typically not governed on a margin or a pricing cap for any portfolio.
Answered
Medium priority
Credit card expenses not declining despite similar acquisition rate
Asked by Aravind R, Sundaram Alternates
Management explained that fixed costs from existing base keep expenses high despite lower new acquisitions.
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Question
Expenses for credit cards continuously increase despite having a similar rate of acquisition in third quarter versus fourth quarter. That is one thing. And also, despite our focus on sourcing mainly through branch banking channel, I'm just trying to understand how this could shape over the years. Why is it not coming down?
Mayank Markanday (Head of Credit Cards)
The cost is yes, there was an increment of just 11,000 cards from quarter three to quarter four. That impacts only the sourcing cost, but the rest of the cost remains same because we have already a base which continues to give us cost in the third quarter also, the same base as given the cost in the fourth quarter also.
Partial answer
High priority
Tier 1 capital ratio post-merger as of April 1
Asked by Pritesh Bumb, DAM Capital
Management gave a range but said the opening balance sheet is not yet finalized, so exact number deferred.
approximate range givendeferred to later for exact number
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Question
Sir, just one question on Tier 1. As of April 1, what will be our Tier 1, sir? This is again including the merger I'm asking.
Prince Tiwari (Head of Investor Relations)
Total network will be around 15,000. ... Tier 1 capital. So total capital will be INR 14,981. ... It will be around 21%. ... 20-21, more around that.