Maintain ROA/ROE near FY23 levels
Management targets profitability and return ratios similar to FY23, despite margin pressure, supported by fee income growth.
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AU Small Finance Bank · forward-looking guidance across the available source record.
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Credit cost to remain similar to FY23
Full-year credit cost guidance unchanged from FY23, with asset quality expected to remain range-bound.
Add 60+ branches/touchpoints in FY24
The bank plans to expand distribution by adding over 60 new branches and touchpoints during the current financial year.
Credit card business to break even by FY25
Management expects the credit card business to become profitable from FY25, as scale and EMI penetration improve.
Deposit growth target of 25% for FY25
Management aims to grow deposits by 25% this fiscal, with INR 25,000 crore incremental deposits needed over the next nine months.
Full-year ROA guidance of 1.6%
Management reiterated ROA guidance of 1.6% for FY25, with potential upside if deposit costs remain favorable.
Credit cost guidance of 1.10-1.15% on advances
Annualized credit cost expected to be in the guided range of 1.10-1.15%, including 3% provision on microfinance book.
Cost-to-income ratio around 61-62% for FY25
Management expects cost-to-income ratio to be around 61-62% for the full year, with Q1 being seasonally lower.
FY27 ROA target of 1.8% reiterated
Management reaffirmed achieving 1.8% ROA by FY27, despite near-term margin and credit cost pressures.
Full-year credit cost guidance raised to ~1% of assets
Credit cost expected to be around 1% of average total assets, up 10-15 bps from previous guidance of 85-90 bps.
MFI book target of INR 7,000 crore by year-end
Microfinance book expected to bottom in Q1, stabilize in Q2, and grow to INR 7,000 crore by March 2026 (5% YoY growth).
NIM expected to bottom in Q2, improve from Q3
Net interest margin likely to decline further in Q2 but start recovering from Q3 onwards, assuming no further rate cuts.
Full-year loan growth of 25-26%
Management guided for on-balance sheet advances growth of 25-26% for FY24, driven by liability growth.
NIM within guided range for FY24
NIM of 5.5% in Q2 remains within the guided range for the full year, despite structural pressure.
Cost-to-income ratio similar to FY23
Full-year cost-to-income ratio expected to land similar to last financial year, despite investments.
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.
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.
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.
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.
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.
Full-year credit cost guidance of 1% of average assets
Management expects full-year credit cost to be within 1% of average total assets, driven by declining unsecured slippages and seasonal recoveries in H2.
Loan growth target of 2x-2.5x nominal GDP
The bank targets full-year loan growth in the range of 2x to 2.5x of nominal GDP, with core secured assets growing 22% YoY.
NIM expansion expected over next couple of quarters
Assuming no further rate cuts, NIM should continue to expand as deposit book reprices and asset mix stabilizes.
Cost-to-income ratio below 60% and OpEx/assets below 4.3%
Management targets cost-to-income ratio below 60% and operating expense to average assets below 4.3% over the medium term.
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.
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.
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.
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.
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.
FY25 cost-to-income ratio of 57%-58%
Full-year cost-to-income ratio expected to be 57%-58%, with Q4 seasonally higher expenses.
FY25 ROA guidance of 1.6%
Despite elevated credit costs, the bank expects to be within striking range of 1.6% ROA for 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.
Full-year credit cost of ~1% of average assets
Management reiterated guidance for FY26 credit cost at 100 bps on average assets, supported by improving asset quality and CGFMU coverage.
Cost-to-income ratio below 60%
Management expects cost-to-income ratio to remain below 60%, with nine-month ratio at 57%.
ROA target of 1.8% over medium term
Management aims to achieve 1.8% ROA on a sustainable basis, with FY27 as a potential timeline.
Loan growth of 20-22%
Management targets loan growth of 20-22% in FY27, around 2.25-2.5x nominal GDP.
Balance sheet growth of ~25% annually over next 3 years
Management expects to grow the balance sheet by around 25% per annum over the next three years, consistent with historical growth rates.
Defend 1.6% ROA in FY25
The bank aims to defend a return on assets of 1.6% in FY25, despite cost of funds expected to rise by 40-45 bps, by leveraging the Fincare merger and shifting to high-yield assets.
Credit card issuance moderated to ~600,000 cards per year
Credit card issuance will be moderated to around 600,000 cards per year, similar to FY24 levels, to control upfront acquisition costs.
Steady-state credit cost of 1.0-1.1% on advances
Management guided for a steady-state credit cost of approximately 1.0-1.1% on advances (70-75 bps on total assets), including the MFI portfolio.
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.
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.
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.
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.
Cost-to-assets ratio below 4% in FY27
Management expects cost-to-assets (ex-CGFMU) to decline below 4% in FY27 from 4.1% in FY26, driven by operating efficiency and AI-led automation.
Credit cost guidance of ~90bps for FY27
Management advised analysts to model credit costs around 90bps for FY27, though actual performance may be better.
Sustained ROA of 1.8% on a full-year basis
Management aims to achieve 1.8% ROA on a full-year basis in FY27, supported by operating leverage and lower credit costs.
Universal banking license application filed in March 2026
The bank filed its final universal banking license application in March 2026 and awaits regulatory approvals.