All small finance lenders were bleeding during the trading session Friday as the private lender fell up to 15 per cent during the early session. The private lenders were reeling under pressure on the back of sluggish quarterly results, depleting asset quality and pressures on margin. Rising provisions have also raised alarms for these lenders.
Suryoday Small Finance Bank topped among the laggards, falling up to 14.57 per cent to Rs 133.30 on Friday, with its total market capitalization falling below Rs 1,500 crore. The stock had settled at Rs 156.05 in the previous trading session.
AU Small Finance Bank dropped more than 6.35 per cent to Rs 604.50 on Friday, with its total market capitalization slipping below Rs 45,000 market.
AU Small Finance Bank has been consciously calibrating growth in high-risk unsecured segments and channelising its efforts on improving profitability as it looks to scale RoA to 1.8 per cent by FY27E by pursuing growth in high-margin segments and calibrating investments, said Axis Securities.
While near-term challenges on asset quality and credit costs persist, we believe focused efforts should enable the bank to sail through and improve asset quality gradually. On expectations of healthy balance sheet growth, healthy NIMs, improving efficiency driving cost ratio improvement and gradually moderating credit costs, we expect AU SFB to deliver a strong 30+% CAGR earnings growth over FY24-27E, it added with a 'buy' rating and a target price of Rs 725.
Shares of Ujjivan Small Finance Bank and Jana Small Finance Bank were down 5.8 per cent each to Rs 34.45 and Rs 432 respectively, while Utkarsh Small Finance Bank was down 4.15 per cent to Rs 39.37 during the day. Other small finance lenders including Equitas Small Finance Bank, ESAF Small Finance Bank and Capital Small Finance Bank were down 3 per cent each.
Ujjivan SFB delivered a 30 per cent YoY earnings decline, led by 5 per cent YoY decline in operating profit and 220 per cent YoY increase in provisions. Asset quality ratios showed a modest deterioration, said Kotak Institutional Equities. 'We are yet to see the peak of slippages for the microfinance industry, but find valuations reasonable," it said upgrading it to but with a fair value of Rs 50.
ICICI Securities initiated coverage on Jana Small Finance Bank and said that Jana has its eyes firmly set on building a diversified secured retail portfolio; calibrating growth in micro-finance, and within this, focusing on rural; a granularized deposit base emphasising on scaling retail deposits; and strengthening its tech capabilities. It gave an 'add' rating with a target price of Rs 630.