Stock of AU Small Finance Bank soars over 5% on strong loan book, deposits

Shares of AU Small Finance Bank soared 5.6 per cent at Rs 639 a piece in Thursday’s intra day deals amid steady growth in the bank's advances, deposits and loan disbursements in the March quarter. In comparison the S&P BSE Sensex was down 0.02 per cent at 73,863.

A total of 5,86,422 shares of the bank changed hands on the BSE as of 11:44 AM. The AU Bank stock reached its 52-week high on January 8, 2024 at Rs 813, while it hit a 52-week low on April 6, 2023 at Rs 553. 

At 12:00 PM, the shares of the bank were trading at 4.63 per cent higher at Rs 633.25 a piece. 

 

On Wednesday, the AU Bank reported its unaudited financials, the bank’s gross advances grew by 25 per cent year-on-year (YoY) in the March quarter to Rs 73,999 crore and rising 9 per cent quarter-on-quarter (QoQ).

The bank reported a 26 per cent increase in total deposits, amounting to Rs 87,182 crore as of March 31, 2024, compared to Rs 69,365 crore in the year ago period. Within deposits the company’s CASA deposits grew 9 per cent YoY to Rs 29,126 crore. However the CASA ratio in total deposits came down from 38 per cent in Q4FY23 to 33 per cent in Q4FY24. 

Furthermore, the gross banks loan portfolio also jumped 28 per cent to Rs 82,175 crore in the March quarter as against Rs 64,072 crore in Q4FY23.

The company’s average Cost of Funds (CoF) for Q4FY24 increased by 8 bps QoQ to 6.98 per cent as against 6.90 per cent in Q$FY24. For FY24, the average CoF increased by 84 bps to 6.80 per cent vs 5.96 per cent for FY23.

In its commentary the management said that the macro landscape remained challenging in Q4FY24, marked by intense competition among banks for deposit mobilisation amidst an ongoing deficit in the systemic liquidity, although there was some easing compared to the Q3’FY24. 

The credit environment continued to remain buoyant during the quarter supported by strong on-ground activity with sustained uptick in demand across businesses, the management said.

The bank also provided an update on its merger with Fincare Small Finance Bank stating that it will be effective from April 1, 2024, and the deposit rates at Fincare branches have been aligned to AU deposit rates. Further, the integration process is expected to get completed over the next 9 months. 

Analysts at Motilal Oswal in a recent report stated that after the merger, the bank is expected to expand into new geographical areas and product segments, with robust growth in high-yielding Wheels, MFI, Gold and SBL segments. 

“We believe that the bank’s execution capability will play an important role in maintaining robust growth and asset quality while delivering healthy RoA. We are optimistic about smooth execution, given the management’s execution prowess and track record over the past couple of decades,” Nitin Aggarwal, Dixit Sankharva, and Disha Singhal of Motilal Oswal wrote in a recent report. 

The analysts reiterated a ‘BUY’ call on the stock with a target price of Rs 720. 

AU Small Finance Bank is a scheduled commercial bank, ranked among Fortune India 500 companies and recognized as the largest Small Finance Bank in the country.

In Q3FY24, the company witnessed a 4 per cent decline in net profit, amounting to Rs 375 crore as against Rs 393 crore in the Q3FY23.