Equitas Small Finance Bank Q3 Results Review - Mixed; Further RoA Improvement Looks Tough: Yes Securities

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Yes Securities Report.Our earnings estimates of Equitas Small Finance Bank Ltd. for FY25/26 have undergone materials cuts due to calibration of loan growth and considering the moderation of credit-deposit ratio. The challenges around improving return on asset beyond 2% could last for the bank, despite a likely significant loan spread expansion (assuming peaking of deposits cost), on account of moderation in CD ratio, limited room for cost-to-income ratio improvement and full normalisation of credit cost. A renewed intent to augment provision coverage ratio towards 70% can push credit cost higher. We estimate 25% loan compound annual growth rate, 30% earnings CAGR and stable RoA of 2% over FY23-26. Return on equity is expected to improve to 17.5-18% by FY26 on rise in leverage. Even on lowered estimates, the valuation is not expensive at nine times price/earnings and 1.5 times price/adjusted book value on FY26 estimates. Maintain 'Buy' and increase 12 months target price to Rs 125 on rolling over target multiple to FY26..Click on the attachment to read the full report:.AU Small Finance Bank Q3 Review - High Provisions Dent Earnings; Asset Quality Deteriorates: Motilal Oswal.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Equitas Small Finance Bank Q3 Results Review - Mixed; Further RoA Improvement Looks Tough: Yes Securities

Limited room for improvement in cost-to-income ratio; credit cost is normalising

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