AU Small Finance Bank logo
- Welcome to another company update! In this blog, we are going to discuss AU Small Finance Bank's two SBUs :- Secured business loans and Commercial banking which provide great growth opportunities to the company.
- Just for knowledge & cause I found it cool :- AU in AU small finance bank does not have a full form. The name "AU" is derived from the Latin word Aurum which means Gold.
Interesting right, but do you know what's more interesting? 🤔
By the end of this blog, you would be an "AU Small Finance Bank" expert! 🎉
Cool isn't it? 😎 Secured Business Loans (SBL)- Around 75% exports of AU Bank is to borrowers who have low capex and OPEX requirements. They offer loans after assessing the cash flow and income profile of the borrowers in great detail. These loans can be of INR 0.2 million to 10 million with a time period up to 15 years.
- Around 75% of the customers are NTB, with a GNPA of 2.69%. About 70% of the customers make payments without any follow up. Even the customers who availed of the moratorium have started to make payments.
- Approximately 63% of the company's book generates a ROI of 14% to 18% and a ticket size of below INR 1.5 million. AU small finance bank is experiencing some good opportunities in the Mid segment as well.
- As most of the impacted sectors post Covid 19 have either recovered fully or are in the last phase of a recovery, the company's management believes that AU small finance bank is placed well to capture this growth opportunity and very likely to move ahead at a pretty healthy pace in the future.
Commercial Banking- Commercial banking business includes Business banking, Agri banking, NBFC lending, Real Estate lending & Transaction Banking services with the first 2 (Business banking and Agri banking) constituting 70% of the complete business.
- Talking about the business mix, 55% is working capital and 45% is term loans.
- The business has a C/I ratio of 35%. The recurring fee income profile stands at 28% of NIM, with a RoA of over 2.5% and very low credit cost. Approximately 98% of the book generates a GNPA of 0.48%.
- Excluding Real Estate, a big chunk of the book is at a floating rate, which is linked to the repo rate and is reset on a quarterly basis.
- The market share of AU Bank in commercial banking is currently at 0.2%. There share of private banks here can been constantly rising at a good pace which is providing significant growth opportunity.
Future Outlook- AU Bank has been reporting a healthy performance with margin expansions & controlled credit cost.
- On the business side, there is a very strong growth in advances. The traction in deposits, especially retail deposits, is remain & expected to remain healthy.
- The bank continues to scale up its key business lines of Vehicles & MSME loans. The management is working on to expand into newer segments which include Housing & Gold loans, Consumer Durable Financing, Credit cards & much more!
- Expect a 28% loan CAGR over Fy22-24.
- Because the bank raised deposit rates by 60 basis points in October 2022, this move can result in an increase in the cost of funds and its impact on the margins would be something to keep a close eye on & monitor as we move ahead in the future.
- GNPA ratio improved by 6 basis points to 1.9% while the NNPA ratio stood stable at 0.5%. Collection efficiency remained pretty healthy at 108% in Q2 FY2023. PCR was stable at 71%.
- Expect 25% earnings CAGR over FY2022-2024 with a RoA of 1.8% and RoE of 14.9% in FY2024.
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Nice Info. Please update recent if possible
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