More upside likely for small finance banks; Ujjivan, Equitas stock jump

Transition to low-cost deposits will help improve margins, though some of this benefit might be offset by rise in expansion-related costs

Non-banking financial companies which have converted into small banks have got investor attention. The share prices of Ujjivan Financial Services, AU Small Finance Bank and Equitas Holdings have risen by 11-20 per cent in the past three months.

This reversal in sentiment is driven by a rebound in their March quarter performance and an improving outlook. Analysts believe there could be further gain in the share prices.

Till the December 2017 quarter, issues such as demonetisation, goods and services tax (GST) and loan waivers impacted many of the new Small Finance Banks (SFBs). Most of these did see marginal profit in FY18,