AU Small Finance Bank soars 9%, hits new high on strong Q3 results

Shares of AU Small Finance Bank soared 9 per cent to Rs 964 on the BSE on Thursday, after the bank’s net profit doubled in December 2019 quarter to Rs 190 crore on the back of strong growth in net interest income (NII). The bank had a profit of Rs 95 crore during the same quarter last fiscal.

The private sector lender's stock is trading at its highest level since its listing on July 10, 2017. It surpassed its previous high of Rs 892, touched on January 20, 2020. With today’s rally, the stock is now quoting 165 per cent higher against its issue price of Rs 358 per share.

The bank’s NII during October-December quarter (Q3FY20) grew 46 per cent to Rs 507 crore from Rs 348 crore in previous year quarter. Profit before tax jumped 87 per cent year on year (y-o-y) to Rs 273 crore from Rs 146 crore in the year-ago quarter.

AU Small Finance Bank’s overall asset quality improved on sequential basis as gross non-performing assets (GNPAs) came in at 1.9 per cent, as compared to 2 per cent in the previous quarter of the current fiscal (Q2FY20). Net NPAs declined to 1 per cent from 1.1 per cent in September quarter.

The loan assets under management (AUM) grew 37 per cent y-o-y to Rs 29,867 crore; while share of retail AUM rose to 81 per cent via-vis around 77 per cent at Q3FY19.

The management said that amidst slowing macro, the bank’s steady growth and improving asset quality is an outcome of its secured lending vintage, diversified product mix, growth opportunities in core markets and Bank Pull.

“AU Small Finance Bank has made strong progress on the business growth front, and alongside has made adequate investments to support growth momentum. We expect business growth to remain robust, while stability in margins and cost control will likely support earnings over the medium term. We consider AU Small Finance Bank as one of the valuable banking franchises in the making, which the market is already beginning to factor in,” Motilal Oswal Securities said in results update. However, the stock was trading above the brokerage's target price of Rs 900 per share.