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AU SMALL FINANCE BANK

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Key Takeaways-:

  • AU SFB’s Loan AUM increased by 37.2% YoY (7.1 % QoQ) to ₹ 298.7bn with a major contribution coming from the Retail segment, which increased by 45.8% YoY. The Retail segment was primarily driven by a 11.5 times YoY increase in Housing loans, coupled with wheels and SBL-MSME segment which too supported retail asset growth by 32.7% YoY and 51.2% YoY, respectively.
  • More than 95% Secured Book, a key factor in maintaining contained credit cost.
  • AUBANK has built a strong presence across three lending segments – vehicle loans,MSME loans and SME loans. It has always focused on secured lending, which has enabled it to maintain strong control on asset quality across economic cycles. Unlike most other NBFCs that have received the SFB license, AUBANK does not have any exposure to the micro-finance segment or to unsecured personal loans. Given the collateralized nature of lending (~99% of loans are secured) AUBANK is able to maintain a strong control on its loss ratios in the event of a default.
  • AU Small Finance Bank’s Reports 73% growth in 1HFY20 PAT, Better Asset Quality.

First 10 quarters of Bank – Building a Technology Led, Retail, Secured, Granular and Diversified Franchise:
• More than 14.50 lakh customers
• Loan AUM grew 38% y-o-y to INR 27,876 Crore and Deposits grew 72% y-o-y to INR 22,149 Crore
• ~79% retail loan proportion; more than 95% secured; ~5 lakh avg. ticket size for retail loans
• Focus on Retail Term Deposits and CASA; Currently at 42% of Total Deposits

Comparison of AU Bank with Others-:

Key metrics of leading banks at the time they were of the size of AUBANK, Source-MOSL
Key metrics – 10 years hence, Source-MOSL

Conclusion-: Overall AU Small Finance Bank has reported strong growth numbers in an environment where other banks are struggling to continue their day to day operations. On the top of that the bank has maintained strong liquidity surplus of Rs 49 Billion and also has LCR of 137% which indicates a comfortable liquidity position of the bank. Also when banks such as Indusind Bank, Rbl Bank etc have been seen large flux of withdrawal of deposits total deposits of AU Bank grew 34.7 per cent YoY/9.6 per cent QoQ to Rs 261.6 billion which shows more faith of the people.

With majority of loan book spread across Retail segment, in the current economy downturn the bank may take a hit in terms of spike in NPA’s , Provisioning , Profitability etc but we believe the bank is well placed to absorb that shock and growth significantly once the economy starts to recover thereby earnings getting to normalised levels faster then compared to its peers.

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