AU Small Finance Bank: AU SFB shares rally 5% on strong Q4 advances, deposit growth

AU Small Finance Bank Ltd (AU SFB) saw its shares rallying 5 per cent in Thursday's trade after the small finance bank reported a strong 25-26 per cent growth in March quarter advances and deposits.

In a filing to BSE earlier today, AU SFB said its gross advances jumped 25 per cent to Rs 73,999 crore in the March quarter from Rs 59,158 crore in the same quarter last year. On a sequential basis, advances grew 9 per cent over Rs 67,624 crore in the December quarter. Total deposits were up 26 per cent at Rs 87,182 crore over Rs 69,365 crore YoY, and up 9 per cent over Rs 80,120 crore in the December quarer.

Following the development, the stock rose 4.57 per cent to hit a high of Rs 632.90 on BSE. Despite this, the stock is down 20 per cent year-to-date.

AU SFB said the macro landscape remained challenging marked by intense competition among banks for deposit mobilisation amidst an ongoing deficit in the systemic liquidity, although there was some easing compared to the Q3’FY24.

The credit environment continued to remain buoyant during the quarter supported by strong on-ground activity with sustained uptick in demand across businesses.

“Amidst this backdrop, the bank delivered a strong operational performance with 9 per cent QoQ growth in its deposits and advances. Bank continues to execute on its strategy of a deposit led asset growth and looks to gain further scale and efficiency with the amalgamation of Fincare SFB into the bank," it said.

AU SFB said as part of its strategy of building a sustainable business model, it had enhanced focus on protecting incremental margins. "We have started seeing some green shoots with the incremental cost of funds for Q4’FY24 declining 4 bps to 7.71 per cent, compared to Q3’FY24 whereas the incremental disbursement yields increased 8 bps to 13.56 per cent, compared to Q3’FY24," it said.

The strong deposit growth was led by strong CASA mobilisation with incremental CASA deposit growing by 10 per cent QoQ. Advances growth continues to remain strong across both retail assets and commercial banking assets and the bank achieved highest ever disbursement in the month of March, AU SFB said.

"The asset quality continues to remain within the long-term range. Bank securitised loans worth Rs 616 crore during the quarter and the bank’s overall Gross Loan portfolio grew by 8 per cent QoQ and 28 per cent YoY Bank carries sufficient liquidity in the form of LCR investments and high quality non-SLR investments," it said.