AU Small Finance Bank (AUBANK) Q3 24/25 earnings summary

Executive summary

• Economic momentum slowed post-festive season, with rural consumption and government CapEx showing some recovery, but overall demand remains below expectations; liquidity deficit persisted, pressuring interest rates and deposit growth.

• The bank's deposit and loan franchises are growing faster than the industry, with a focus on optimizing cost of funds and expanding in top cities; secured loans rose 5.1% QoQ (~90% of portfolio), while unsecured businesses declined 7% QoQ.

• Asset quality challenges are concentrated in MFI and unsecured digital retail, while secured and commercial banking assets remain robust; unsecured advances, especially MFI, remain in a corrective phase.

• Integration of Fincare branches and product lines is progressing, with full tech integration expected by year-end; amalgamation increased paid-up share capital and expanded the bank's asset and liability base.

• Financial statements for the period include the amalgamation of Fincare Small Finance Bank, making year-over-year comparisons not directly comparable.

Financial highlights

• Total deposits reached ₹1,12,260 Cr, up 14.9% YTD and 2.3% QoQ; CASA ratio at 31%.

• Gross loan portfolio at ₹1,08,921 Cr, up 12.9% YTD and 3.7% QoQ; secured retail assets grew 14% YTD.

• Net Interest Income up 53% YoY to ₹2,023 Cr; NIM at 5.9% for Q3; pre-provision operating profit rose 6% QoQ; PAT down 7% QoQ to ₹528 Cr due to higher credit costs in MFI.

• EPS up 24% YoY; book value per share up 23% YoY; capital adequacy ratio at 18.01% as of December 31, 2024.

• Gross NPA at 2.31%, net NPA at 0.91% for Q3 FY25; PCR at 80%.

Outlook and guidance

• GLP growth expected at ~20% for FY25, with secured assets at 23–25% and continued degrowth in MFI and credit cards.

• Credit costs for FY25 guided at 1.5–1.6% of GLP; ROA guidance of 1.6% is maintained.

• Deposit growth guidance for FY25 is 23–24%; cost of funds expected at 7.10–7.15% for the year.

• Long-term aspiration to reach 2% ROA, contingent on lower cost of funds and improved asset quality.

• Results for the current period include Fincare operations, and future periods will reflect the combined entity's performance.