AU Small Finance Bank (AUBANK) Q2 24/25 earnings summary

Executive summary

• Q2 FY25 saw strong growth and profitability despite a challenging operating environment marked by high inflation, tight liquidity, election cycles, and weather disruptions impacting informal, rural, and semi-urban segments.

• Early signs of economic recovery emerged since mid-September, with optimism for H2 improvement.

• Application filed with RBI for transition to Universal Bank license, aiming for sustainable growth and lower funding costs.

• Results include operations of erstwhile Fincare Small Finance Bank post-amalgamation from April 1, 2024, making current period figures not comparable to previous periods.

Financial highlights

• Total deposits crossed ₹1.1 lakh crore, up 12.7% quarter-on-quarter, with CASA deposits growing 11% sequentially and a CASA ratio of 32%.

• Gross loan portfolio reached ₹1,05,031 crore, up 5.3% QoQ and 8.9% YTD.

• Net Interest Income grew 58% YoY to ₹1,974 crore in Q2 FY25; PAT rose 42% YoY and 14% QoQ to ₹571 crore.

• NIM at 6.1% for Q2 FY25; cost-to-income ratio improved to 57% in Q2 from 61% in Q1.

• Gross NPA ratio at 1.98% and Net NPA ratio at 0.75% as of September 30, 2024.

Outlook and guidance

• Full-year loan and deposit growth target of 25% reaffirmed; margins to remain around 6.0%.

• ROA target for the year set at 1.6%, with Q2 and H1 ROA at 1.7%.

• Credit cost expected to remain elevated at ~1.28% of GLP for the year, with potential 5-10 bps variance depending on H2 economic conditions.

• Amalgamation with Fincare expected to enhance scale, operational synergies, and future results.