AU Small Finance Bank Q3 Results Review - Delivers Lower Profitability: Yes Securities

Yes Securities Report

Delivers lower profitability with pressure on core NIMs, opex and credit cost

AU Small Finance Bank Ltd.'s delivered a significant 14% miss on our profit after tax estimate, despite higher securitisation income (change in accounting plus larger quantum done in the quarter), on account of much higher-than-expected opex and credit cost.

Reported net interest margin was flat QoQ at 5.5% but included the higher securitisation income, and the portfolio spread was lower by 30 basis point sequentially with portfolio yield declining by 10 bps.

Bank’s assets under management grew by 6.4% QoQ/30% YoY while its gross advances grew 4% QoQ/20% YoY on higher impetus on securitisation (overall securitized portfolio reached 11% of AUM).

Stronger growth continued in lower-yielding loan product segments of home loans, business banking and agri finance. Deposits growth was sturdy at 5.8% QoQ/31% YoY with renewed traction in savings account deposits (up 7.5% QoQ) and consistent healthy mobilisation of retail term deposits.

The rise in cost of funds was higher than preceding quarter at 20 bps and the credit-deposit ratio moderated to 83% with higher growth in deposits versus on-balance sheet loans.

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