AU Small Finance Bank Q3 Results Review - Steady Operating Performance; Loan Growth Accelerates: Motilal Oswal
AU Small Finance Bank reported 30% YoY growth in net earnings (8% beat), driven by lower provisions.
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Motilal Oswal Report
AU Small Finance Bank Ltd. reported 30% YoY growth in net earnings (8% beat), driven by lower provisions. However, operating profit came in line with growth in net interest income, aided by stable margins and healthy loan growth.
Gross advances/deposits grew strongly at 38% YoY each, however, current account and savings account deposits witnessed pressure, resulting in CASA ratio moderating to 38%.
The absolute amount of gross non-performing asset increased 2% QoQ. However, headline GNPA/net non-performing asset ratio improved 9 basis points/5 bps QoQ to 1.81%/0.51%, respectively. Provision coverage ratio ratio improved to 72.1%.
We slightly raise our estimate, factoring in for higher loan growth and estimate AU Small Finance Bank to deliver 25% earnings compound annual growth rate over FY22–25 with a return on asset/return on equity at 1.8%/16.1%, respectively, in FY25E.
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