AU Small Finance Bank hits new high, gains 14% in two days

The stock surged 10% intra-day to Rs 787 and surpassed its previous high of Rs 747 touched on April 27, 2019, on back of heavy volumes on the BSE.

Shares of AU Small Finance Bank advanced by 10 per cent, hitting a new high of Rs 787 on the BSE on Wednesday on the back of heavy volumes. With this, the private sector lender surpassed its previous high of Rs 747 touched on April 27, 2019.

Trading volumes on the counter jumped nearly 10-fold today, with 308,000 equity shares changing hands on the BSE till 01:32 pm. Around 193,233 shares, representing 0.07 per cent of total equity of the bank, changed hands at 09:59 am in a single deal, the exchange data shows.

The stock gained 14 per cent in the past two days, as compared to an unchanged benchmark S&P BSE Sensex. Meanwhile, in the past four weeks (post September quarter (Q2FY20) results), it outperformed the market by surging 21 per cent, as against a 5 per cent gain the benchmark index.

AU Small Finance Bank’s overall asset quality remained stable as gross non-performing assets (GNPAs) came in at 2 per cent, as compared to 2.1 per cent in the previous quarter of the current fiscal (Q1FY20). Asset quality in core segments remained stable: vehicle finance (2.3 per cent) and MSME (2.5 per cent).

In the recently concluded quarter, the bank's profit before tax jumped 55 per cent year on year (y-o-y) at Rs 217 crore, while the net income increased 41 per cent at Rs 452 crore. Similarly, loan AUM grew 38 per cent YoY to Rs 27,876 crore and deposits grew 72 per cent YoY to Rs 22,149 crore.

Analysts at HDFC Securities have ‘buy’ rating on the stock with target price of Rs 807 per share.

“We like AU BANK’s ability to sustain quality growth, particularly in challenging environs. This, we believe, is reflective of its NBFC roots even as it gains from the troubles faced by erstwhile peers,” the brokerage firm said in result review.

“Improvement in the operating leverage (oplev) in this quarter beat estimates, and will be key to return on average assets (RoAA) improvement. While asset quality remains stable, the bank’s NBFC/RE exposure does hold some risk. Superior return ratios and improving performance across metrics warrant premium multiples”, it added.