Utkarsh Small Finance Bank reported decent financial growth for the quarter ended June 2023 (Q1FY24), with profit jumping more than 20 per cent compared with a year ago.

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The microfinance lender said that its PAT (profit after tax) stood at Rs 107 crore in Q1FY24, up 20.2 per cent compared to Rs 89 crore in the same quarter a year ago.

Net interest income (NII) also rose 20.9 per cent year-on-year to Rs 422 crore in the June quarter compared with Rs 349 crore in the year-ago period.

Despite a good set of financial numbers for the quarter ending June 30, 2023, shares of Utkarsh Small Finance Bank dropped more than two per cent in morning trade on Wednesday to a low of Rs 49.64 apiece on BSE.  

Asset quality improves

With regards to the asset quality, the bank’s provisions also fell to Rs 77 crore compared with Rs 91 crore a year ago. However, they jumped when compared with Rs 34 crore of provisions in the previous quarter ended March 2023.

The bank’s net interest margin (NIM) slipped slightly to 9.2 per cent in Q1 FY24 compared with 9.7 per cent in Q1FY23.

“Re-pricing of interest rates in bank’s key lending segment (microfinance), which reflect with a lag-on-account fixed rate of interest, will have a positive impact on the bank’s yield on advances over next few quarters,” Utkarsh Small Finance Bank said in earnings note.

The bank’s gross non-performing asset (GNPA) ratio was down to 3.13 per cent in Q1FY24 compared with 3.23 per cent in the previous quarter. Net NPA ratio also improved to 0.33 per cent during the quarter compared with 0.39 per cent in Q4FY23.

Growth in loan portfolio

Utkarsh Small Finance Bank’s loan portfolio grew 31.4 per cent year-on-year to Rs 14,394 crore as on June 30, 2023. The bank said that its microfinance portfolio accounted for 63 per cent of the total loan portfolio, while non-microfinance portfolio accounted for 37 per cent of the loan book.

The bank’s deposit base also expanded, growing 35.6 per cent YoY to Rs 13,967 crore as on June 30, as the lender expanded its footprint further in the country by opening 21 banking outlets in Q1FY24.

Utkarsh Small Finance is engaged in providing banking and financial services to the unserved sections of the society. The bank’s microfinance lending activities are primarily focused in rural and semi-urban locations of the country, while its other services are spread across the country.

On Wednesday, the Utkarsh Small Finance Bank stock was trading 1.9 per cent lower at Rs 50.61 at 11:11 AM on BSE.