Utkarsh Small Finance Bank (UTKARSHBNK) Q4 16/17 earnings summary

Executive summary

• Incorporated April 30, 2016; received the final small-finance-bank licence in November 2016 and began banking operations January 23, 2017, following transfer of the legacy lending business.

• At March 31, 2017, operations covered 110 districts in 10 states, with 350 microfinance branches, 23 MSME locations, 3 housing-loan locations, 5 banking branches and 3,845 employees.

• Initial strategy centers on financial inclusion, converting existing microfinance locations to micro-banking branches, building deposits and adding products and channels.

Financial highlights

• FY17 standalone results for the period ended March 31: net interest income ₹31.37 crore, net total income ₹45.41 crore, PBT ₹6.52 crore and net profit ₹4.83 crore.

• Standalone balances at March 31: advances ₹1,593.91 crore, deposits ₹18.72 crore, investments ₹729.23 crore and net worth ₹304.88 crore.

• Group-level FY17 PAT was ₹34.4 crore, down 6.6% YoY; a ₹60.8 crore portfolio write-off, mainly linked to demonetization, reduced profit.

• Group-level interest income rose 62.8% to ₹393.0 crore and operating profit rose 68.1% to ₹117.7 crore; operating expenses increased 68.6% to ₹121.4 crore.

Outlook and guidance

• FY18 targets included ~400 branches, with 50 General Banking branches and 350 Micro Banking branches; 59 branches were expected operational by the end of Q1FY18.

• FY18 targets cited in an interview: assets of ₹3,500 crore and deposits of ₹1,800–2,000 crore; roughly three-quarters of lending expected from microfinance.

• Micro Banking portfolio growth target was ₹1,000 crore in FY18, mainly through current geographies and two new JLG loan products of ₹60,000 and ₹1,00,000.

• Plans included 30 new MSME branches by Q3FY18, a 53-branch footprint, more secured lending and an average ticket size target of ~₹2.5 lakh.