SBFC Q1 Review - Steady Improvement In Profitability; Seasonality Derails Growth Momentum: ICICI Securities

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ICICI Securities Report

SBFC Finance Ltd. Q1 FY25 performance sustained improving trajectory in earnings, driven by cost efficiencies and steady credit cost QoQ, as reflected in return of equity improving to 12.3% versus 11.9% QoQ and 12% YoY. Cost to assets under management fell to 4.8% in Q1 FY25 from 5.4% YoY and credit cost remained flat QoQ at 80 basis points.

AUM growth was marginally lower due to seasonality and adverse impact of Reserve Bank of India circular dated April 29th 2024.

Notably, while most financiers are finding it challenging to pass on the borrowing rate hike, SBFC is successfully navigating the increasing rate cycle as reflected in cumulative greater then 100 bps increase in asset yields and 15 bps decline in funding cost during past one year.

Rise in gross non-performing loan ratio to 2.60% versus 2.43% QoQ is seasonal, and hence, we do not foresee any upside risk to FY25 credit cost guidance of 80-100 bps.

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