Au Small Finance Bank Ltd. share price target

AU SFB’s Q4FY25 performance was mixed with sustained growth momentum and benefits from operational efficiency, but elevated credit cost in unsecured portfolios (MFI + credit card + PL).

AU SFB continues to grow its credit portfolio at a healthy pace, defying industry trend and the declining MFI/Card book. However, higher CoF and interest reversal on MFI/Card NPAs has led to continued margin correction (10bps QoQ).

We maintain our BUY recommendation on the stock.

Advances growth driven by secured loans; deposit growth was strong compared to system levels

FY25 has been weak for the bank marked by elevated stress in unsecured retail loans resulting in a sharp increase in credit costs, higher interest rates and tight liquidity. Q4 earnings missed estimates led by accelerated provisioning on account of the stress in unsecured loans, yet PCR improved.

AU Small Finance Bank (AUBANK) posted a 4QFY25 PAT of INR5.04b (7% beat; -5% QoQ), amid better other income partly offset by higher provisions. NII grew 3.5% QoQ to INR20.9b (in line), while NIM contracted 6bp QoQ to 5.8%, primarily on account of a change in asset mix.

Strategic pivot towards high yielding assets

We recommend a BUY rating on the stock with a target price of Rs 622/share, implying an upside of 10% from the CMP.

AU SFB’s profitability, post merger in Apr’24, was impacted due to elevated credit cost on the back of higher-than expected delinquencies in its credit card (CC)/microfinance (MFI) portfolios and NIM compression.

We maintain our BUY recommendation on the stock.

AU SFB logged a muted performance with a 5% miss on PAT at Rs5.3bn/RoA at 1.5%, mainly on lower other income and elevated provisions owing to ongoing stress in unsecured loans (MFI, Cards, PL) and seasonality impact on the agri and wheels book.

AU Small Finance Bank (AUBANK) reported 3QFY25 PAT of INR5.3b (8% beat), led by controlled opex, though provisioning expenses were high.

AU SFB’s Q2FY25 performance was mixed with it sustaining profitability (RoA of 1.6%) and growth momentum (loan growth at 6% QoQ) but credit cost continues to be higher than the guided range.

We maintain our BUY recommendation on the stock.

Though credit cost rose sharply, AU SFB reported a sharp earnings beat led by strong fee income/ treasury gains and lower opex. The bank managed to report RoA/RoE at 1.7%/ 14.5% in Q2FY25.

AU Small Finance Bank (AUBANK) reported a 2QFY25 PAT of INR5.71b (16% beat) fueled by healthy other income and controlled opex, which offset higher provisions.

AU Small Finance Bank (AUBANK) is well-positioned for strong growth, demonstrating a steady improvement in operating profitability as it capitalizes on the synergies resulting from the merger.

AU SFB reported RoA of 1.6% during Q1FY25 despite an increase in credit cost to 1.3% vs 0.7% (standalone basis), benefiting from a sharp 90bps QoQ increase in NIM to 6% vs 5.1% QoQ.

We maintain our BUY recommendation on the stock.

AUBANK reported 1QFY25 PAT of INR5.02b, significantly ahead of our estimates, led by controlled opex. NII stood at INR19.2b (in line), while NIMs improved 90bp QoQ to 6%.