 "RBI okays re-appointment of Sanjay Agarwal as AU SFB's MD; stock surges 16%")
Shares of AU Small Finance Bank (SFB) surged 16 per cent to Rs 671.85 on the BSE in Thursday's intra-day trade after the Reserve Bank of India approved the reappointment of Sanjay Agarwal as managing director and chief executive officer (MD and CEO) of the bank.
The RBI also approved re-appointment of Uttam Tibrewal as whole-time director of AU Small Finance Bank. Both have been reappointed for three years with effect from April 19, 2023.
The shareholders had already approved the re-appointment via postal ballot on 09th March, 2022, AU Small Finance Bank said in an exchange filing.
AU SFB's stock price has been under pressure due to the lack of clarity about management continuity, as well as the uncertain macro environment. Motilal Oswal Financial Services (MOFSL) believes that the RBI's approval removes a key overhang, and will now shift the focus to the fundamental performance of the bank.
AU SFB has been posting a healthy operating performance, led by consistently strong loan growth, the strengthening of its liability franchise, and improving asset quality (on robust collections). The brokerage firm estimates AU SFB to deliver a 29 per cent CAGR in loans over FY23-25.
"We believe the next milestones to look forward to would be the RBI's approval on the bank's AD-1 banking application and progress on the universal banking license, which the bank is now likely to apply for. We estimate AU SFB to deliver a ~25 per cent earnings CAGR over FY23-25 with RoA/RoE of 1.8 per cent/16.3 per cent," MOFSL said. It reiterated its 'BUY' rating with a target price of Rs 740 (premised on 3.6x Sep’24E BV).
Earlier this month, CARE Ratings had reaffirmed the ratings assigned to the debt instruments of AU SFB, factoring in the continued momentum of growth in business and size, post-conversion into a small finance bank (SFB) in April 2017, the establishment of deposit franchise along with a sizeable current account savings account (CASA) deposits, and a moderately-diversified advances portfolio with a largely secured lending portfolio.
Also Read
"The ratings also factor-in the experience of the management team, comfortable capitalisation levels supported with periodic equity capital raise, continuous improvement in asset quality parameters during H2FY22 and 9MFY23 (refers to the period April 1 to December 31) after being impacted due to Covid-19-related stress, and healthy profitability," the rating agency had said in its rationale.
CARE Ratings believes that AU SFB shall continue to maintain its steady growth in advances, deposits and healthy profitability profile over the medium term while maintaining stable asset quality and comfortable capitalization levels.