BackSmall Finance Banks disbursement rise in Q3, interest rate hikes drive term deposits
On Thursday, three SFBs namely Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Suryoday Small Finance Bank announced their provisional data for December 2022 quarter. The largest SFB in terms of market share, AU Small Finance Bank has also presented its Q3 data.
PremiumSmall finance banks witnessed a broadly strong third quarter for FY23 with interest rate hikes driving deposit growth and disbursement remaining strong for the majority of them both on a year-on-year and quarter-on-quarter basis. While their asset quality improved sharply in the quarter. On Thursday, three SFBs namely Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Suryoday Small Finance Bank announced their provisional data for December 2022 quarter. The largest SFB in terms of market share, AU Small Finance Bank has also presented its Q3 data. Their stocks are in focus.
Suryoday Small Finance Bank:
In Q3FY23, Suryoday posted an 11% growth in gross advances to ₹5,409 crore versus ₹4,872 crore in Q3FY22. Sequentially, the growth was 1%. However, the SFB said, excluding stressed asset pool sales, the growth in advances stood at 20% yoy and 9% qoq.
Meanwhile, its total deposits stood at ₹4,684 crore in Q3FY23 rising by a whopping 48% yoy and 11% qoq. The SFB's disbursement for the quarter came in at ₹1,265 crore recording 13% growth each year-on-year and quarter-on-quarter. Collection efficiency also improved to 110.4% in Q3FY23 versus 86.5% in Q3FY22 and 94.6% in Q2FY23.
During the quarter, term deposits of ₹4,031 crore comprises retail at 56% and bulk at 44%.
In terms of asset quality, the bank's gross NPA dipped sharply to 4.26% in Q3FY23 compared to 10.5% in Q3FY22 and 9.9% in Q2FY23. Suryoday said, the bank has sold a pool of stressed assets comprising NPA & technically written-off accounts amounting to ₹492.05 crore (out of which ₹64 Crore is technically written-off accounts) for a purchase consideration of ₹135.1 Crore during the month of December 2022.
Equitas Small Finance Bank:
During the third quarter of FY23, Equitas posted 27% yoy and 9% qoq growth in gross advances to ₹24,923 crore, while total deposits increased by 31% yoy and 8% qoq to ₹23,393 crore.
Disbursements for the quarter were strong at ₹4,797 crore registering a growth of 68% yoy and 25% qoq. Notably, the bank said, disbursements exclude ₹183 crore in Q2FY23 and ₹226 crore in Q3FY23 under the TReDS platform.
As per the filing, in Q3FY23, the bank's retail term deposits rose by 18% yoy and 8% qoq, while bulk term deposits garnered a huge 139% yoy growth and also rose by 19% sequentially. In the quarter, current accounts posted 50% yoy growth to ₹796 crore and savings accounts saw a 17% yoy upside to ₹10,021 crore. CASA ratio however was down to 46.24% in Q3FY23 versus 50.80%% in Q3FY22.
The bank's cost of funds stood at 6.41% lower than 6.47% in Q3FY22 but higher than 6.25% in Q2FY23.
Ujjivan Small Finance Bank:
In its regulatory filing, the bank said "showing growth quarter after quarter with continued improvement in asset quality."
In Q3FY23, the bank's advances are up 33% yoy and 5% qoq to ₹21,895 crore with disbursement sustaining above ₹4,800 crore mark. However, in Q3FY23, the bank's disbursement stood at ₹4,838 crore which is marginally up by 1% yoy but down by 1% qoq.
On the other hand, total deposits registered a growth of 49% yoy and 14% qoq to ₹23,154 crore in Q3FY23 driven by strong momentum in retail deposits which was up by 72% yoy and 15% qoq.
In the quarter, it said, asset quality continues to show strength with PAR/GNPA further declining to 5%/3.3% from 6.1%/4.4% respectively QoQ. Further, collection efficiency was maintained at 99%+, with restructured and NPA book showing healthy collections. The bank continues to focus on stressed buckets and reducing incremental overdues.
As of December 31, 2022, the gross NPA was at 3.3% sharply down from 9.8% in Q3FY22 and 4.4% in Q2FY23.
AU Small Finance Bank:
The bank announced its provisional data on Wednesday. Its deposit stood at ₹61,101 crore rising by 5% qoq. While gross advances picked up by 7% qoq to ₹56,335 crore. AU Small registered 16% qoq growth in fund-based disbursements to ₹10,012 crore in Q3FY23, while non-fund-based disbursement dipped by 15% qoq.
Among the key highlights in Q3FY23, AU Small's management said that interest rate pressures persisted in Q3FY’23 with a sharp rise in banking system deposit rates; the Bank also increased its deposit rates which resulted in higher traction in term deposits as against savings deposits.
Further, despite the uptick in Q3 funding cost, AU Small has been able to protect margins so far. It needs to be noted that the bank's endeavour remains to prioritise risk-adjusted yields and calibrated growth underpinned by strong underwriting. Also, the quarter saw strong collection recovery across buckets highlighting the sustained business momentum.
In Q3FY23, AU Small's average cost of funds stood at 6% versus 5.8% in Q2FY23, while the incremental cost of funds came in at 6.3% versus 6.1% in Q2FY23.
Notably, in Q3FY23, the credit card business issued ~4 lakh cards with a monthly run rate of ~30K cards and average monthly spends ~ ₹650 crore.
As per the management commentary, AU Small has been focused on building sustainable and stable asset and deposit franchises. Q3’FY23 was another quarter where we saw strong and consistent performance across parameters amidst a challenging macro environment of persistent inflation and tighter liquidity.
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