Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ujjivan Small Finance Bank Ltd (BOM:542904, Financial) reported a 14% year-on-year growth in its loan book, reaching INR 30,344 crore as of September 2024.
- The affordable housing and micro mortgages portfolio grew significantly, with a 43% year-on-year increase, reaching INR 5,784 crore.
- The bank's secured portfolio now constitutes 34.9% of the total book, with expectations to reach 40% by the end of the financial year.
- Retail deposits grew by 32% year-on-year, with total deposits reaching INR 34,070 crore, emphasizing a strong retail footing.
- The bank received RBI approval for a license to offer a full-fledged bouquet of production services, including retail foreign currency deposits and trade finance offerings, which will aid in widening its product offerings and increasing other income.
Negative Points
- Total disbursements during the quarter were down 6% compared to Q2 FY 2024, indicating a slowdown in business volumes.
- The microfinance segment faced challenges, with an increase in PAR to 5.1% in September 2024 from 4.2% in June 2024.
- Credit costs increased to INR 151 crore in Q2 FY 2025 from INR 110 crore in Q1 FY 2025, with full-year credit costs expected to be around 2.3% to 2.5%.
- The bank's cost-to-income ratio for the quarter was high at 60%, with operating costs being a key monitorable.
- Return on Assets (RoA) and Return on Equity (RoE) showed softness, with RoA at 2.2% and RoE at 15.7% for Q2 FY 2025, and similar softness expected for the full year.
Q & A Highlights
Q: Your credit cost guidance of 2.3 to 2.5% implies further worsening of trends. Have you seen any improvement in collection efficiencies? Also, can you provide more details on the microfinance portfolio?
A: Our collection efficiency for the non-delinquent portfolio is 99.23%, and we are seeing better efficiency in October compared to September. About 7% of our borrowers have four or more lenders, and slippages from this group are higher than those with fewer lenders.
Q: Has there been any change in the write-off policy, and what caused the reduction in Tier 1 capital this quarter?
A: There has been no change in the write-off policy. We wrote off about 50 crores of NPA from 2019. The reduction in Tier 1 capital is due to dividends paid during the quarter.
Q: On the individual loan side, what are the current trends, and do you foresee quality issues in the second half?
A: The individual loan portfolio has better slippages and NPA rates than the group loan portfolio. We are focusing on growing this portfolio profitably, and the current NPA is below 2%.
Q: Can you clarify the revised guidance for growth and ROE?
A: Our secured portfolio is expected to grow by over 40%, and individual loans in the microfinance book by 17% for the full year. We are not providing guidance on group loan growth due to uncertainties. ROE will soften this year but is expected to improve next year.
Q: Is there any update on the universal banking license?
A: The matter is under active consideration, and we expect to have more information by the end of this financial year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
