Key highlights from Ujjivan Small Finance Bank Limited (UJJIVANSFB) Q2 FY24 Earnings Concall
- Business Performance and Growth
- Disbursements grew 18% year-on-year to INR 5,749 crores.
- Gross loan book increased 27% year-on-year and 5% quarter-on-quarter.
- Total deposits grew 43% year-on-year and 9% quarter-on-quarter to INR 29,139 crores.
- Added 39 new branches, taking total to 700.
- Asset growth driven by MicroBanking, affordable housing and FIG.
- Affordable Housing Performance and Expansion
- Affordable housing constitutes 15% of the bank’s total gross loan book, with INR541 crores disbursed in the last quarter.
- The business is moving towards a hub-and-spoke model, adding 10 new hubs in the recent quarter to improve operational efficiency and reduce costs.
- Secured Loan Portfolios and FIG Growth
- Individual loans are growing faster, and existing group loan borrowers are transitioning to individual loans.
- The bank expects mature individual loan borrowers to shift to secured loan portfolios like Micro – LAP and affordable housing, further enhancing growth opportunities.
- FIG disbursed INR293 crores, a 39% year-on-year increase, focusing on good quality NBFCs with stable collections.
- Digital and Retail Initiatives
- The bank is enhancing its analytics to facilitate customer transition to secured loans and to explore cross-selling and upselling opportunities.
- The Hello Ujjivan app is gaining acceptance, with plans to introduce a repeat loan facility to reduce branch visits and costs.
- CASA crossed INR7,000 crores, growing 28% year-on-year, and retail term deposits increased by 56% year-on-year.
- Asset Quality Remains Strong
- GNPA at 2.2% versus 2.4% in June.
- NNPA remains negligible at 0.09%.
- Collections strong with 98.3% up to 1 EMI collection efficiency.
- Slippages lower at INR 113 crores versus INR 103 crores in Q1.
- Yield Trends Across Segments
- MSME yield decline due to low disbursements during transition.
- Affordable housing yields largely flat.
- Microbanking yields to increase with upcoming repricing.
- Guidance on Credit Costs and ROE
- Credit cost guidance of <100 bps for FY24.
- Normalized credit cost of 125-150 bps.
- ROE guidance of 20% plus for FY25 and FY26.
- ROE guidance of 22% for FY24.
- Trends in Individual Lending
- Average ticket size largely flat quarter-on-quarter at about INR 131,000.
- EPS decline possibly due to lower yields.
- Repricing of Assets
- Expects repricing of assets to occur, particularly in the MicroBanking book, where 53% is yet to be repriced.
- The repricing will be gradual, with 28% of the book getting a 50 basis-point adjustment and the remaining 25% seeing a 100 basis-point adjustment over the next 3-4 quarters.
- Opex Trends
- Reduction in off-roll collection staff due to improving asset quality.
- Increase in on-roll staff for secured loan collections and new branches.
- Costs in line with projections, new branches to bring business.
- Cashless collections increased to 37% from 20% last year.
- New Customer Acquisition
- Added 5.3 lakh in H1, marginally below 3 lakhs per quarter.
- Slower growth compared to last year due to regulatory changes.
- New branches will boost acquisition going forward.
- Group Loan Growth Outlook
- Lower in Q1/Q2, picks up in Q3/Q4 seasonally.
- Impacted by floods in some geographies in Q2.
- Expect pickup in disbursements and loan growth in Q3 and Q4.
- Andhra Pradesh Market Entry
- Soft launch and starting with liability business.
- Microbanking not in focus currently.
- Margin Outlook and Market Share
- Yield may decline as secured loans increase, but CASA may offset this partly for MSME.
- As rates fall, margin should remain healthy.
- Market share growing faster than industry in key states.
- New clients have no prior NPA history.
- Marketing costs should reduce going forward.
- Board to consider applying for universal bank license.
- Impact of Reverse Merger
- Addition of over INR 400 crores to equity net worth.
- Reduction of 2.82 crore shares from total base.
- Expected to add over INR2.4 to book value.