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.
AUBANK / Q3-FY24 / risks
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AU Small Finance Bank · Material risks, their source context, and severity in the latest available quarter.
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Material risks this quarter
high
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.
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.
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.