Equitas Small Finance Bank expands 8% on solid March quarter

Finance


Equitas Small Finance bank shares surged 7.5% to 1 share in intraday trading on Friday after the lender’s net profit rose 58% year-on-year in the fourth quarter of fiscal 2023. It came out to 78.35 rupees. At 9:55 a.m., the stock rose nearly 5% at Rs 76.4 each against his 0.8% rise in the benchmark S&P BSe Sensex. Meanwhile, the BSE Bankex index rose his 1.4%.

After market hours on Friday, the bank reported a 58% increase in net profit in the March quarter to a record Rs 190 crore on the back of improved asset quality and business expansion.

Equitas Small Finance Bank said in its stock exchange filings that it continues to expand into new products such as housing finance, used cars and merchant OD.

On the operational side, Equitas’ operating profit increased about 35% year-over-year, while the annual provision remained flat. Net interest income (NII) increased 30% year-over-year and proceeds from the sale of amortizing loans to ARC drove a strong earnings performance as we continued to operate.

Expenses increased 35% year over year due to additional staff.

Reported Net Interest Margin (NIM) increased slightly sequentially. This is primarily due to a reduction in interest rate reversals due to slippage.

Advances received growth (35% y/y/12% q/q) was broad-based, with SME lending up 35% y/y, auto finance up 38% y/y, microfinance up 35% y/y, It shows the focus on growth in all areas. vertical.

Deposit growth was similarly strong, about 35% year-on-year and about 8% quarter-on-quarter.

Covid has impacted banks’ loan portfolios through a very high percentage of customers under moratoriums and restructuring, but banks have managed to contain credit costs fairly well (2.0% on average over the last four years). . Asset quality improved with more widespread improvements in delinquencies and net slippage trends. Credit costs in the fourth quarter were approximately 200 bps annualized, primarily due to improved PCR.

“We will maintain our ADD rating at an adjusted fair value of Rs.77 (previously Rs.68). We value the bank at a mid-mid-teenage RoE as it continues its steady recovery in profitability, largely driven by lower medium-term credit and operating costs, according to a report by Kotak Institutional Equities. , subdued slippage and steady broad credit growth should further improve banks’ earnings profiles.



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