July 13, 2024

Motilal Oswal’s analysis report on AU Small Finance Financial institution

AUBANK reported PAT of INR3.75b in 3QFY24 (down 4% YoY, 10% miss), on account of greater provisions (up ~4x YoY, 44% beat). NII grew 15% YoY to INR13.25b (in line), whereas NIMs contracted 6bp QoQ to five.5%. PPoP grew 18% YoY to INR6.6b at the same time as opex grew 25% YoY (5% greater than our estimate). The fee-income ratio, thus, elevated to 63% from 61.3% in 2QFY24.  Advances grew 20% YoY (4% QoQ), led by progress within the wholesale e book. Nonetheless, the cardboard enterprise threw a adverse shock, with a surge in delinquencies and provisioning bills. Deposits grew strongly by 31% YoY (5.8% QoQ), led by time period deposits. GNPAs/NNPAs elevated 7.6%/18.6% QoQ. Thus, headline GNPA/NNPA ratios deteriorated 7bp/8bp QoQ to 1.98%/0.68%. Credit score value elevated to 0.62%. Excluding bank cards, the web credit score value normalized at 0.44%.

Story continues beneath Commercial

Outlook

We lower our FY24E/FY25E EPS by 6-7% and estimate FY25 RoA/RoE of 1.7%/ 15.7%. We retain our BUY score with a TP of INR800 (3.4x Sep’25E BV).

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AU Small Finance Financial institution – 2912024 – moti