AU Small Finance Bank Limited (NSE: AUBANK) is a leading Indian small finance bank that offers a wide range of banking and financial services to its customers. The bank is headquartered in Jaipur, Rajasthan and has a strong presence in North India. Its services include retail and corporate banking, microfinance, housing finance, and insurance. AU Bank has a customer-centric approach and uses innovative technology to provide seamless banking services to its customers. The bank has won several awards and recognitions for its excellence in customer service and digital innovation. It is known for its focus on financial inclusion and empowering its customers to achieve their financial goals. The bank’s mission is to provide banking services to the underbanked and unbanked segments of the population in India and promote financial inclusion.
AU Bank’s Financial Performance For Q3 FY23
AU Small Finance Bank Limited reported Revenue from Operations for Q3 FY23 of ₹ 2,412.96 Crore up from ₹ 1,772.09 Crore year on year, a growth of 36%. Consolidated Net Profit of ₹ 392.82 Crore, up 30% from ₹ 302.04 Crore in the same quarter of the previous year. The Earnings per Share is ₹5.87 for this quarter.
The credit market remained strong with strong demand coming across all the asset SBUs, be it Wheels, SBL, Housing and Commercial Banking. The asset business saw a disbursement north of INR 10,000 crores, growing 23% year-on year with the disbursement yields remaining stable. AU Bank’s collection efficiency for the quarter was around 107%, resulting in a gross NPA of 1.8% and net NPA at around 0.51%. The bank remains well capitalized with capital adequacy around 22% and Balance Sheet crossing 80,000 crores. ROA and ROE for the quarter was around 2% and 15.2% respectively.
Share Price Performance
- The share price was closed at ₹590.3 on March 13, 2023, with a one-year high of ₹732.98
- The stock has decreased by nearly 13% in 6 months and remained flat over the year.
- Results were announced on January 19th. The share has decreased by almost 5% since that time.
AU Bank’s Increased Deposits
Global economic activity has slowed as a result of geopolitical tensions, tightening global financial conditions, persistently high inflation, and sharper-than-expected monetary tightening by central banks around the world. As a result of global inflationary trends, weakening global demand, and high volatility in portfolio flows, India continues to face increased pressures. Tighter liquidity and strong credit growth have resulted in increased demand for deposits and a rise in deposit rates across the board in the last quarter. Deposits increased by 38% year on year and 5% quarterly, owing to an increase in retail term deposits. CASA plus retail term deposits account for roughly 70% of total CASA.
The competition for deposits has gotten more intense as the system credit growth remains robust, which has led to an increase in deposit rates for all commercial banks in the third quarter of FY23. Additionally, AU Small Finance increased the rates on saving deposits and term deposits. The overall response was quite positive in the retail sector, with term deposits were clearly preferred.
Developments In Expansion strategy
In this quarter, the bank added 42 new touch points, surpassing the 1,000 touch points with a presence in 21 states and three union territories in India. Furthermore, in the last quarter, it expanded into two new states: Andhra Pradesh and Kerala. In the third quarter of FY23, AU Small Finance Bank added approximately 3.3 lakh customers. The bank also expanded their third-party offerings by partnering with HDFC Life and ICICI Lombard for insurance.
On the digital front, the bank continued to expand and improve their various initiatives, such as their own app, AU 0101, Video Banking, and Credit Cards. It now has approximately 16 lakh digital customers and approximately 4 lakh credit card customers, with a monthly issuance of 35,000 cards.
Other Updates
The automation effort at AU Small Finance Bank has also begun to bear fruit, with more than 150 processes automated. This should help to reduce costs in the long term. The cost of funds increased by 14 basis points for the quarter compared to the previous quarter. As liquidity remains tight, interest rates remain a key variable, and the ability to optimize cost of funds remains a top priority for the management.
As per the management, “The asset business saw a disbursement north of INR 10,000 crores, growing 23% year-on year with the disbursement yields remaining stable. Our non-fund business also saw sanctions of around INR 500 crores. Our asset quality, which is one of our core strength, has remained resilient across cycles and we are committed to maintaining pristine asset quality. Moreover, we are seeing an increased awareness around customers to repay their dues on time. And there is also a strong momentum in the business, resulting in improved collection across buckets and products.”