AU Small Finance rallies 11% as GNPAs remain stable in Q1 despite lockdown

The bank's absolute GNPA in April-June quarter (Q1FY22) was broadly stable QoQ as net additions (slippages, net of recoveries and upgrades) to GNPA declined by Rs 8 crore

Shares of AU Small Finance Bank rallied 11 per cent at Rs 1,142 on the BSE in the intra-day trade on Tuesday after the lender said its absolute gross non-performing assets (GNPA) in April-June quarter (Q1FY22) were broadly stable on a sequential basis as net additions (slippages net of recoveries and upgrades) to GNPA declined by Rs 8 crore.

Effectively, the GNPA ratio is expected to stay around 4.3 per cent (stable QoQ). On the other hand, total restructured loans increased to around 3.8 per cent (v/s 1.8 per cent in FY21).

Meanwhile, total assets under management (AUM) declined 3 per cent QoQ but were up 22 per cent year on year (YoY) at Rs 36,635, AU Small Finance Bank said in its provisional performance review for the quarter ended on June 30, 2021 (Q1FY22).

"Furthermore, on a gross advance basis, the bank witnessed a 2 per cent QoQ decline (up 31 per cent YoY). The sequential decline was primarily on account of lockdowns in core states/territories, which resulted in subdued disbursements at Rs 1,890 crore (74 per cent QoQ decline)," it said.

On the liability front, AU SFB's total deposits grew at 38 per cent YoY and at 3 per cent QoQ to Rs 37,014 crore. This, it said, was primarily led by robust CASA growth of 157 per cent YoY (16 per cent QoQ); thus, the CASA ratio improved to 26 per cent, compared with 23 per cent in Q4FY21 and 14 per cent in Q1FY21. Cost of funds improved 90 basis points (bps) YoY (20bps QoQ) to 6.3 per cent.

“AU Small Finance Bank posted moderation in loan growth, largely affected by the regional lockdowns. Systemic credit growth remained weak, with 1 per cent decline in FY22YTD. However, total ECLGS disbursements remained high during the quarter. On the other hand, deposit growth came in strong, led by robust CASA growth. The CASA ratio, therefore, continued to improve. On the asset quality front, the total collection efficiency surged in Jun’21, while the stable QoQ GNPA ratio gives us comfort," Motilal Oswal Financial Services said in an update. The brokerage firm maintains a 'buy' rating on the stock with target price of Rs 1,175.

At 11:44 am, the stock was up 10 per cent at Rs 1,135 on the BSE as compared to a 0.36 per cent rise in the S&P BSE Sensex. Trading volumes on the counter jumped over nine-fold with a combined 5.96 million shares having changed hands on the NSE and BSE till the time of writing of this report.