AU Small Finance Bank trades under pressure despite healthy Q2 numbers; brokerages raise targets

AU Small Finance Bank Share Price: AU Small Finance Bank stocks on Thursday, October 20, traded under pressure despite a good second quarter results. The private sector lender reported a 23 per cent rise in its net profit at Rs 343 crore in the July-September quarter on healthy growth in loan disbursals aided by consistent fall in bad loans. The lender had posted a net profit of Rs 279 crore in the same period in the year ago fiscal year.

The stock dropped 3 per cent to quote a price of Rs 607 on the NSE at 10:50 AM. On BSE, the scrip made an intraday low of Rs 585.35, declining more than 5 per cent. The bearish sentiment in the counter came as domestic equity markets reversed course after four days of gains following weak global market trends.
 
The Jaipur headquartered bank's total income was up by 40.3 per cent at Rs 2,240 crore as against Rs 1,597 crore. Bank's net interest income (interest earned minus expended) grew by 44 per cent to Rs 1,083 crore during July-September period of 2022-23, as against Rs 753 crore in same period of 2021-22, AU SFB said in a regulatory filing.

Gross advances of the lender rose to Rs 52,452 crore as of Q2FY23 as against Rs 36,405 crore during the same period a year ago, with auto, MSME and home loans accounting for 75 per cent of the component. Disbursements during the quarter stood at Rs 8,605 crore as against Rs 5,061 crore.

Brokerages' Targets On AU Small Finance Bank
Citi: Maintain Buy, Target raised to Rs 805 from Rs 765

Credit Suisse: Maintain Underperform, Target raised to Rs 530 from Rs 510

Morgan Stanley: Maintain Overweight, Target Rs 875

"The operating environment in Q2FY23 saw uncertainty over inflation, liquidity and rates intensify significantly which continues to be the case. While the domestic outlook is encouraging, the possibility of a lagged impact of these factors on demand and activity levels can't be ignored and we are watchful," Sanjay Agarwal, MD & CEO, AU Small Finance Bank, said.

Agarwal said bank's collection efficiencies remained strong resulting in robust asset quality performance.

The balance sheet was fortified by raising capital of Rs 2,500 crore in the form of Rs 2,000 crore equity capital and Rs 500 crore as tier-II capital, which makes the AU even more resilient amid this uncertainty, and well prepared to capture growth opportunities, the official said.

Asset quality showed improvement with gross non-performing assets, as a percentage of gross advances by end of September 2022, falling to 1.90 per cent from 3.16 per cent by year-ago same period and 1.96 per cent by end of June 2022 quarter. The net NPAs (or bad loans) too declined to 0.56 per cent at end of Q2FY23 against 1.65 per cent by end of September 2021. It was unchanged against June 2022 quarter.

AU Small Finance Bank delivered a return of nearly 14 per cent to is investors in 2022 so far. Th 52-week range is Rs 732.98 - Rs 462.50.