AUBANK saw strong b/s growth in 4QFY20, amidst a challenging external environment. As with other banks, AUBANK's PAT was hit by higher provisions. AUBANK is better-placed vs. its SFB peers on assets quality (largely secured book) and liability franchise (granular deposits). Given the systemic issues, we believe mid-tier banks (particularly SFBs) will face challenges in deposit mobilisation, in addition to higher stress. Dwindling competition from NBFCs, high CRAR, and a credible execution track record underpin our positive stance. Post the sharp correction, we upgrade to ADD (TP of Rs 549, 3.3x FY22E ABV+ Rs 14 for the residual AAVAS stake).
Deposit momentum: AUBANK reported 9.6% QoQ deposit growth in a challenging environment. This was driven by 9.7% growth in TDs and 19.5% CA growth. While overall SA deposits dipped 4.9% sequentially (led by a 30% QoQ (+36% YoY) decline in wholesale SA), retail SA grew 3% YoY. Retail TDs (39% of TDs) grew ~89% YoY. Increasing deposit retailisation is evident and the trends in retail deposits will be a monitorable.
AUM growth ~27% YoY was relatively healthy, albeit slower vs. earlier qtrs, on a/c of COVID-19. Retail loans grew faster, at 37.6/6.5% YoY, driven by strong growth in core segments (VF+27/4.6% & MSME +43.5/7.8%). Strong QoQ growth in these segments positively surprised. While COVID-19 will impact growth in the near term, but the bank's capital position, scope for geographical expansion, and dwindling competition from NBFCs present a significant long-term growth opportunity. We expect loans to grow at +20% over FY20-22E.
Asset quality improves: GNPAs dipped ~9.2% QoQ to Rs 4.6bn (1.68%, - 20bps) led by lower slippages at 1.07bps ann. (-158/-73bps). Recoveries while flattish QoQ (+24.3% YoY), were negatively impacted by the lockdowns. Despite AUBANK's commendable track record, we believe asset quality deterioration is inevitable. The bank's largely secured book and semi-urban and rural focus provide some comfort. We expect GNPAs of 2.9% by FY21E.
Management commentary on COVID-19 impact: 58% of touch points are in green / orange zones. 63% of business is in semi-urban and rural locations. 29% of customers availed the moratorium (25% in value terms). The banks 0+dpd portfolio dipped from ~Rs 36bn on 1-Mar-20, to ~Rs 23bn by Apr-20. AUBANK saw deposits increase by Rs 0.8bn in Apr-20. AUBANK's board has approved a fund raise of upto Rs 25bn.
Shares of AU Small Finance Bank Ltd was last trading in BSE at Rs.490.75 as compared to the previous close of Rs. 516.55. The total number of shares traded during the day was 118793 in over 2020 trades.
The stock hit an intraday high of Rs. 507.7 and intraday low of 490.75. The net turnover during the day was Rs. 58507987.