EUR 120.00 For Business Accounts Only

MOSL: AU SMALL FINANCE BANK (Buy)-Strong overall performance; return ratios improving steadily

AU SMALL FINANCE BANK: Strong overall performance; return ratios improving steadily

(AUBANK IN, Mkt Cap USD2.8b, CMP INR688, TP INR800, 16% Upside, Buy)

 

• PAT increased 88% YoY to INR1.7b (v/s our est. of INR1.3b) aided by higher NII growth, other income and lower opex. Provisions were higher at INR610m as the bank created excess standard asset provision of INR390m. As a result, PCR shored up to 43.9%. For 1HFY20, PPoP/PAT grew 74%/115% to INR5.7b/INR3.6b.
• NII increased 41% YoY to INR4.5b (8% beat) led by advances growth of 37% YoY and NIM expansion of 20bp QoQ to 5.2%. Operating expenses growth at 21% YoY trailed total income growth of 36% YoY, resulting in 570bp QoQ improvement in CI ratio to 53.9% (adjusted for stake sale gain in 1QFY20). PPoP grew 59% YoY to INR2.8b (v/s our est. of INR2.2b).
• Gross AUM increased 38% YoY to INR279b led by 44%/14% YoY growth in the retail/wholesale book. Within the retail book, Wheels/ Secured MSME book grew 34%/53% YoY and formed 41%/34% of the overall AUM. Retail AUM forms 79% of the total AUM v/s 76% in 2QFY19.