Conservatism brings growth-margin trade-off into play
AUBANK posted its highest-ever quarterly earnings on the back of lower-than expected credit costs (30bps annualised), partly offset by elevated operating expenses. The bank calibrated its loan growth (+38% YoY) to mirror the growth in deposits (~400bps QoQ rundown in CASA), resulting in moderation across segments such as wheels, home loans, and commercial banking. In a rising interest rate environment, AUBANK has chosen to remain conservative in order to protect its margins and asset quality. However, continued investments in franchise-building and new businesses are likely to be a drag on medium-term profitability vectors. We continue to watch out for signs of operating leverage and the impact of incremental rate transmission on margins. We tweak our FY23E/FY24E estimates by +6% each for better risk-adjusted margins; maintain REDUCE, with a TP of INR610 (3.1x Sep-24 ABVPS).
Shares of AU Small Finance Bank Limited was last trading in BSE at Rs. 616.35 as compared to the previous close of Rs. 621.45. The total number of shares traded during the day was 37793 in over 2608 trades.
The stock hit an intraday high of Rs. 629.75 and intraday low of 613.85. The net turnover during the day was Rs. 23411540.00.