AU Small Finance Bank Q4 Results Review - PPoP Inline; Asset Quality Improves: Motilal Oswal

Motilal Oswal Report

AU Small Finance Bank Ltd. reported a profit after tax of Rs 3.7 billion in Q4 FY24 (down 13% YoY), due to the stamp duty and other transaction charges related to the merger with Fincare SFB.

AU SFB’s net interest income grew 10% YoY to Rs 13.37b (3% miss), while net interest margin contracted 40 bp QoQ to 5.1%.

Pre-provision operating profit grew 16% YoY to Rs 6.6 billion (in line) even as opex increased 26% YoY (4% above our estimate). Cost/income ratio thus increased to 65% from 63% in Q3 FY24.

Advances grew 25% YoY (~10% QoQ), led by growth in both retail and wholesale books.

Deposits reported a healthy 26% YoY (8.8% QoQ) growth. C/D ratio was comfortable at 83.9% during the quarter.

Groo/Net non-performing asset improved 31 bp/13 bp QoQ to 1.67%/0.55%. Credit costs moderated to 0.47%. Provision coverage ratio increased 164 bp QoQ to 67.6% in Q4 FY24.

We raise our FY25E/FY26E earnings per share by 4-5% and estimate FY26 return on asset/return on equity at 1.7%/15.8%. Reiterate Buy with a target price of Rs 735 (based on 2.7 times FY26E book ).

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