Ujjivan Small Finance Bank Q4 Results Review - Robust Performance, Yet Again: Yes Securities

Yes Securities Report

Ujjivan Small Finance Bank Ltd. delivered 6%/14% beat on our pre-provision operating profit/profit after tax expectations despite higher opex. The overall outperformance was aided by-

1. 2% higher net interest income (20 basis points portfolio spread improvement),

2. stronger other income (strong core fee growth plus sustained elevated bad debts recovery) and

3. NIL credit cost (sustained significant collections even on restructured and non-performing loan pools).

While collection cost was lower in the quarter, the addition of 31 branches and 1100 plus employees underpinned higher opex and thus an increase in cost/income ratio.

Robust loan growth (10% QoQ/33% YoY), continued encouraging trends in current account and savings account and retail term deposits (both up 10-11% QoQ), absence of credit cost and higher recoveries from written-off loans once again drove strong return on asset/return on equity of 3.9%/30%.

Ujjivan Small Finance Bank net interest margin decline (30 bps QoQ), despite a substantial expansion (50 bps QoQ) in loan book yield, was caused by build-up of liquidity (incl. investments) on the balance sheet from stronger liabilities mobilisation and internal cash generation.

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