AU SFB: Good for now, but challenges mount for the costliest banking stock

Loan and deposit accretion may slow down the current operating environment

With gains of over 28 per cent in a year and the Street's confidence in its stock at an all-time high, AU Small Finance Bank (AU SFB) has been an outlier among peers. Its valuations at 5xFY21 estimated price-to-book make it the most expensive banking stock. Singapore’s private equity major Temasek, hiking its holding in the bank to 4.8 per cent enhances its appeal among investors, when some of its larger counterparts are scrounging to attract credible names.

Is there more leg to AU SFB’s stock rally? Given its relatively smaller base, AU SFB offers growth upwards of 25 per cent