AU Small Finance Bank reported strong profit growth in the September quarter, supported by higher net interest income and improving asset quality. Jefferies and JPMorgan retained their positive ratings on the stock but lowered their target prices, citing slightly softer margins and concerns around asset quality trends. Both brokerages highlighted healthy growth momentum, while flagging monsoon-related risks.
AU Small Finance Bank Q2 Results: Key Highlights
- Net profit rose 52.9% year-on-year to Rs 858 crore.
- Net interest income increased 31.5% to Rs 2,820 crore.
- Gross non-performing assets declined to 1.99%, indicating an improvement in asset quality.
Jefferies Maintains Buy, Cuts Target Price To Rs 1,250
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Jefferies retained its Buy rating on AU Small Finance Bank but lowered its target price to Rs 1,250 from Rs 1,270.
- Loan growth: The bank continued to report healthy loan growth, although margins were slightly softer.
- Deposits: Deposit mobilisation remained strong, supporting the bank's funding position.
- Asset quality: Slippages marginally edged higher, and lower provision coverage reflected increased write-offs and a change in the composition of non-performing loans.
- Universal banking transition: The shift to becoming a universal bank could strengthen the deposit franchise and enhance the bank's positioning.
JPMorgan Retains Overweight, Cuts Target Price To Rs 1,165
JPMorgan maintained its Overweight rating but reduced its target price to Rs 1,165 from Rs 1,230.
- Growth momentum: Balance sheet expansion continued to accelerate, while credit cost performance was significantly better than management's guidance.
- Asset quality: Recent trends remained a concern, although the brokerage viewed much of the pressure as seasonal.
- Monsoon risk: Weather-related risks remain an important factor to monitor for this small finance bank
Both brokerages remain positive on AU Small Finance Bank, supported by growth and deposit momentum. However, their lower target prices reflect caution around margins, asset quality, and potential monsoon-related stress.
Also Read: AU SMALL FINANCE BANK Q2: Profit Grows Over 50%, Asset Quality Improves
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