AU Small Finance Bank Q2FY25 Results: Strong Growth and Profitability
AU Small Finance Bank reported robust financial results for Q2FY25, demonstrating strong growth in net interest income, profitability, and deposit base. The bank crossed the significant milestone of Rs. 1 lakh crore in both gross loan portfolio and total deposits, while maintaining a healthy asset quality.
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by RA ALOK DAIYA SEBI Reg. INH000011468
Profitability and Efficiency
Growing Profitability
Net interest income surged by 58% YoY, reaching Rs. 1,974 crore, driven by a strong loan portfolio growth and improved net interest margin.
Improved Efficiency
Cost-to-income ratio improved significantly, decreasing by 535 bps YoY to 56.7%, showcasing the bank's focus on operational efficiency.
Strong Return Ratios
AU Small Finance Bank reported an annualized RoA of 1.7% and an RoE of 14.5% for Q2FY25, reflecting healthy profitability.
Robust Loan and Deposit Growth
1
Loan Portfolio Expansion
The bank's gross loan portfolio surpassed Rs. 1 lakh crore, registering a 5.3% QoQ growth and an 8.9% YTD growth.
2
Deposit Growth Momentum
Total deposits also exceeded Rs. 1 lakh crore, driven by a 12.7% QoQ increase and a 12.3% YTD growth.
3
Stable CASA Ratio
CASA ratio remained stable at 32%, indicating a healthy deposit mix and a strong retail franchise.
Asset Quality
GNPA
GNPA increased marginally to 1.98%.
NNPA
NNPA rose to 0.75%.
Credit Cost
Credit cost for Q2FY25 stood at 0.28% of average assets, primarily due to stress in unsecured segments.
Provision Coverage Ratio
The provision coverage ratio remained strong at 82%, including technical write-offs.
Expansion and Distribution
AU Small Finance Bank expanded its presence to 21 states and 4 UTs with 2,408 physical touchpoints. The bank now serves over 109 lakh customers with a workforce of 47,000+ employees.
Credit Ratings
Management Commentary
Sanjay Agarwal, MD & CEO, acknowledged the challenging macroeconomic environment in H1FY25, but expressed optimism about the improving economic activity in recent weeks. He highlighted the bank's commitment to sustainable growth, margin expansion, and fee income growth.
Agarwal also mentioned the bank's application for a voluntary transition to a universal bank, which is expected to enhance brand perception and enable the next phase of growth.
Future Outlook
Optimistic Growth Prospects
AU Small Finance Bank remains optimistic about the long-term growth prospects of the Indian economy. The bank is well-positioned to capitalize on the increasing demand for financial services in the under-served and unbanked segments.
Financial Inclusion and Digital Banking
The bank is expected to benefit from the government's focus on financial inclusion and the rising adoption of digital banking. AU Small Finance Bank's strong retail franchise, robust loan portfolio, and efficient cost structure provide a solid foundation for sustainable growth.
New Areas of Growth
The bank is also actively exploring opportunities in new areas such as digital lending, wealth management, and insurance. As the Indian economy continues to grow, AU Small Finance Bank is poised to play a significant role in driving financial inclusion and empowering the under-served population.