AU Small Finance Bank announced its robust financial performance for the second quarter of the fiscal year 2023-24, defying the challenges posed by the macroeconomic environment characterized by tighter liquidity and persistent inflation. The bank demonstrated significant growth in deposits, advances, and profitability, showcasing its resilience and commitment to serving its customers.
The bank reported a pre-provisioning operating profit (PPoP) surging by 30% year-on-year (YoY) to ₹648 Crore. This robust performance continued with a 17% YoY increase in net profit, reaching ₹402 Crore. Additionally, the bank’s core strength, Net Interest Income (NII), witnessed a substantial 15% YoY growth, culminating at ₹1,249 Crore. Notably, the Net Interest Margin (NIM) for Q2’FY24 stood at a commendable 5.5%. The bank’s financial health was further underscored by a strong Return on Assets (ROA) of 1.7% and a Return on Equity (ROE) of 13.9%. These results reflect a solid and profitable quarter for the institution.
Total deposits of the bank surged impressively, crossing the ₹75,000 Crore mark, with a remarkable 30% YoY growth and a notable 9% QoQ increase. The bank’s Current Account and Savings Account (CASA) deposits also showed robust performance, with a 6% QoQ growth, reaching ₹25,666 Crore, contributing to a healthy CASA ratio of 34%.
The bank’s balance sheet achieved a significant milestone, crossing ₹1,00,000 Crore, which includes securitized assets. Moreover, AU Bank expanded its customer base by 3.65 lakh individuals during Q2’FY24, with 45% of them being onboarded through digital products and channels, underscoring the bank’s commitment to digital innovation. The credit card portfolio reached a commendable 7 lakhs, and deposits sourced via Video Banking climbed to ₹1,400 Crore, demonstrating the bank’s continued growth and diversification.
The gross advances recorded a substantial 24% YoY increase and a notable 2% QoQ growth, reaching ₹65,029 Crore. This represents a remarkable 10% growth since March’23, showcasing the bank’s lending prowess. During this period, the bank also securitized assets worth ₹2,922 Crore. While there was a slight uptick in Gross Non-Performing Assets (GNPA) to 1.91% year-on-year, the Net NPA remained stable at 0.60%. Notably, standard restructured advances decreased to 0.8% sequentially, reflecting the bank’s proactive risk management approach.
The bank’s product and service expansion initiatives included the introduction of the “Zenith+ Credit Card,” a super-premium Metal Credit Card. Furthermore, AU Bank expanded its third-party product offering by adding Max Life Insurance, Bajaj Alliance Life Insurance, and Star Health Insurance as Bancassurance partners. These developments signify the bank’s commitment to providing a wider range of financial solutions to its customers and continuing its growth trajectory.
Commenting on the performance, Sanjay Agarwal, MD & CEO, AU Small Finance Bank said, “The global environment remains challenging with uncertainties around geo-politics, supply chain disruptions and inflation continuing to put persistent pressure on interest rates. The Indian economic environment looks strong and resilient and continues to provide a multitude of growth opportunities across various sectors. However, challenges around inflation, liquidity and disruptions in weather patterns remain, warranting caution as a lender and we remain watchful and responsive in caliberating our strategy. In this backdroup, our performance in Q2’FY24 was resilient and sustainable with growth across deposits, digital and advances. This resilience is further complemented by the positive outlook in AU markets, where there are promising prospects for growth and market penetration. Our key strategic focus is on building low-cost retail deposits, even in the current environment of elevated costs and intense competition. Our newely created ‘Swadesh Banking’ group is focused on furthering our financial inclusion strategy by penetrating deeper in rural India, where a significant unbanked population resides. Additionally, our new brand campaign “Soch Badlo aur Bank Bhi”’ will continue to establish a robust brand presence and fostering top-of-mind recall. While being watchful, I am quite optimistic about the Indian economy in the long term and the banking sector looks poised for a sustained period of growth. The business is excelling on all fronts, instilling great confidence in us to affirm our FY24 guidance set forth at the start of this fiscal year and we continue to focus on sustainable growth, aiming to further fortify our balance sheet.”
