AU SMALL FINANCE BANK 2021-22 Annual Report Analysis

Thu, 31 Mar

AU SMALL FINANCE BANK has announced its results for the year ended March 2022. Let us have a look at the detailed performance review of the bank during the year 2021-22.

AU SMALL FINANCE BANK Income Statement Analysis

• Interest income during the year rose 19.6% on a year-on-year (YoY) basis.
• Interest expenses were up by 4.0% YoY during the same period.
• Operating expenses increased by 45.5% YoY during the year.
• The bank's net interest income (NII) increased by 36.7% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a growth and stood at 5.3% in FY22 as against 5.2% in FY21.
• Other income declined by 30.1% YoY during the year.
• Net profit for the year declined by 3.5% YoY.
• Net profit margins during the year declined to 19.1% in FY22 from 23.6% in FY21.

AU SMALL FINANCE BANK Income Statement – 2021-22

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*	% Change
Interest Income	Rs m	49,501	59,217	19.6%
Other Income	Rs m	14,209	9,937	-30.1%
Interest Expense	Rs m	25,846	26,876	4.0%
Net Interest Income	Rs m	23,654	32,341	36.7%
Operating Expense	Rs m	16,584	24,128	45.5%
Pre-provision Operating Profit	Rs m	21,280	18,150	-14.7%
Provisions & Contingencies	Rs m	9,573	6,852	-28.4%
Profit before tax	Rs m	14,585	14,541	-0.3%
Tax	Rs m	2,878	3,242	12.7%
Profit after tax	Rs m	11,707	11,298	-3.5%
Minority Interest	Rs m	0	0	0.0%
Net Interest Margin	%	5.2	5.3
Net profit margin	%	23.6	19.1

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AU SMALL FINANCE BANK Balance Sheet Analysis

• The bank's deposits during FY22 stood at Rs 525.8 bn as compared to Rs 359.8 bn in FY21, thereby witnessing an increase of 46.2%.
• Advances for the year stood at Rs 461.0 bn as compared to Rs 346.1 bn during FY21, a rise of 33.2%.
• Cost of deposits for AU SMALL FINANCE BANK fell 16.6% and stood at 4.3%, while yield on advances fell to 10.6%.
• The lender's investments rose to Rs 153.1 bn during the year from Rs 108.2 bn in FY21.
• Borrowing stood at Rs 59.9 bn, a fall of 14.8% as compared to previous year.
• Overall, the total assets and liabilities for FY22 stood at Rs 690.8 bn as against Rs 515.9 bn during FY21, thereby witnessing a rise of 33.9%.

AU SMALL FINANCE BANK Balance Sheet – as on March 2022

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*	% Change
Networth	Rs m	61,721	74,727	21.1%
Advances	Rs m	346,089	460,953	33.2%
Deposits	Rs m	359,793	525,846	46.2%
Yield on advances	%	11.4	10.6
Cost of Deposits	%	5.2	4.3
Investments	Rs m	108,154	153,065	41.5%
Borrowings	Rs m	70,297	59,908	-14.8%
Total Assets	Rs m	515,913	690,778	33.9%

Current Valuations for AU SMALL FINANCE BANK

• The trailing twelve-month earnings per share (EPS) of the bank stands at Rs 35.9, an improvement from the EPS of Rs 37.5 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 622.2, stands at 16.2 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 5.6 times, while the price to income ratio stands at 3.1 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*
Income per share (Unadj.)	Rs	158.5	188.1
Earnings per share (Unadj.)	Rs	37.5	35.9
Diluted earnings per share	Rs	17.6	16.9
Avg P/E ratio	Rs	23.0	16.2
Avg P/ABV ratio	Rs	6.1	5.6
Avg Market Cap	Rs	268,902	183,490
Dividends per share (Unadj.)	Rs	0.00	1.00

Ratio Analysis for AU SMALL FINANCE BANK

• Efficiency Ratios

  Credit/Deposit Ratio: The bank's credit/deposit ratio deteriorated and stood at 87.7x during FY22, from 96.2x during FY21. The credit/deposit ratio tells us how much money a bank has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The bank's debt to equity ratio increased and stood at 7.84x during FY22, from 6.97x during FY21. The debt to equity ratio of a bank tells us how much debt a bank uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): AU SMALL FINANCE BANK's capital adequacy ratio (CAR) was at 21.0% as on 31 March 2022 as compared to 23.4% a year ago. This ratio helps measure the financial strength of the bank or any finance company to meet their obligations using their assets and capital.

  A bank that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the bank's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a bank sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the bank is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the bank deteriorated and stood at 15.1% during FY22, from 19.0% during FY21. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the bank deteriorated and stood at 1.64% during FY22, from 2.27% during FY21. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the bank deteriorated and stood at 14.01% during FY22, from 15.60% during FY21. The ROCE measures the ability of a bank to generate profits from its total capital (shareholder capital plus debt capital) employed in the bank.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a bank's gross NPAs to gross advances. AU SMALL FINANCE BANK's gross NPA ratio stood at 2.0% as of 31 March 2022 compared to 4.3% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a bank's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the bank has made provisions.

  The net NPA ratio of AU SMALL FINANCE BANK was 0.5% in financial year 2022. This compared with 2.2% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*
Credit/Deposit Ratio	x	96.2	87.7
Debt to Equity Ratio	x	7.0	7.8
Loans / Deposits	x	0.2	0.1
Capital Adequacy Ratio	%	23.4	21.0
Return on Equity	%	19.0	15.1
Return on Assets	%	2.3	1.6
Return on Capital Employed	%	15.6	14.0
% of Gross NPAs	%	4.3	2.0
% of Net NPAs	%	2.2	0.5
Yield on Advances	x	11.4	10.6
Yield on Investments	x	15.0	6.0

To see how AU SMALL FINANCE BANK has performed over the last 5 years, please visit here.

AU SMALL FINANCE BANK Share Price Performance

Over the last one year, AU SMALL FINANCE BANK share price has moved up from Rs 562.4 to Rs 622.2, registering a gain of Rs 59.8 or around 10.6%.

Meanwhile, the S&P BSE BANKEX is trading at 46,701.0 (up 2.1%). Over the last one year it has moved up from 39,542.9 to 46,701.0, registering a gain of 7,158.2 points (up 18.1%).

Overall, the S&P BSE SENSEX is up 7.8% over the year.

(To know more, you can check out historical annual results for AU SMALL FINANCE BANK here and quarterly results for AU SMALL FINANCE BANK here)

Read: Latest Annual Report Analysis of AU SMALL FINANCE BANK