- Book Value Per Share: Increased by INR2.6 to INR29.06 as of March 31, 2024.
- Final Equity Dividend: Recommended INR1.5 per equity share.
- Branch Count: Added 123 branches, total of 752 branches.
- Loan Disbursement (Q4): INR6,681 crores, 11% growth over last quarter.
- Full-Year Loan Disbursements: INR23,389 crores, 17% year-on-year increase.
- Gross Loan Book: Grew by 24% year-on-year and 10% quarter-on-quarter.
- New Microfinance Customers (Q4): 2.7 lakh, total 10.5 lakhs for FY2024.
- Affordable Housing Disbursements (Q4): INR730 crores.
- Affordable Housing Disbursements (Full Year): INR2,284 crores, 45% year-on-year growth.
- MSME Disbursements (Q4): INR128 crores.
- FIG Disbursements (Q4): INR546 crores.
- Total Deposits: INR31,462 crores, 23% year-on-year growth, 6% quarter-on-quarter growth.
- CASA Book: INR8,335 crores, CASA ratio improved to 26.5% from 25.5% last quarter.
- Net Interest Margin (NIM): 9.4% for Q4, 9.1% for full year FY24.
- Cost of Funds: 7.2% for Q4.
- Cost-to-Income Ratio: 56% for Q4 FY24.
- Pre-Provision Operating Profit: INR519 crores, 26% year-on-year growth.
- Gross NPA (GNPA): 2.1%.
- Net NPA (NNPA): 0.3%.
- Slippages (Q4): INR175 crores.
- Bad Debt Recovery (FY24): INR141 crores.
- Write-Offs (Q4): INR65 crores.
- Credit Cost (Q4): INR79 crores.
- Profit After Tax (PAT): INR330 crores for Q4, INR1,281 crores for full year FY24.
- Return on Assets (ROA): 3.3% for Q4, 3.5% for full year FY24.
- Return on Equity (ROE): 24.8% for Q4, 26.1% for full year FY24.
Release Date: May 21, 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 strong profitability for Q4 FY24, with a PAT of INR330 crores and a full-year profit after-tax of INR1,281 crores, growing by 17% year on year.
- The bank's gross loan book grew by 24% year on year and 10% quarter-on-quarter, reflecting robust loan disbursement and customer acquisition.
- The bank's CASA ratio improved to 26.5% from 25.5% in the last quarter, indicating a healthy growth in low-cost deposits.
- Ujjivan Small Finance Bank Ltd (BOM:542904) successfully completed the merger process with its holding company, resulting in an increase in book value per share by INR2.6.
- The bank's asset quality remains strong with GNPA at 2.1% and NNPA at 0.3%, and collections continue to be strong around 99% levels.
Negative Points
- Slippages for the fourth quarter were at INR175 crores, up from INR140 crores in the third quarter, indicating some pressure on asset quality.
- The cost-to-income ratio for Q4 '24 remained elevated at 56%, due to ongoing investments in infrastructure and technology.
- The bank's cost of funds is expected to remain elevated due to recent hikes in term deposit rates, which could impact margins.
- There were specific pockets of stress in the microfinance portfolio, particularly in Punjab, Haryana, Kerala, and Tamil Nadu, due to loan waiver campaigns and over-borrowing.
- The bank's operating expenses saw a sharp uptick in Q4, driven by higher HR costs and premises costs due to branch expansions.
Q & A Highlights
Q: Hi. Good morning. Congrats on good quarter. Sir, my first question is on the asset quality. So while the slippages run rate was slightly higher in the quarter, it could be because of Punjab, but the upgrades and recoveries quantum was quite lower in Q4. Any specific reason why upgrades and recoveries were lower? And second, associated question, is we are continuously seeing reduction in on-roll and off-roll collection team in micro banking. Can it have any future bearing on collection efficiency? Maybe OD collections or maybe in-field recoveries and upgrades?
A: I'll answer the first question, which is our slippages. So if you have noticed, our slippages have consistently been in the range of 0.5%. There was a minor reduction, I would not say a reduction, in the fourth quarter. And there is no specific reason for that. It has been more or less flat. And as far as the team size is concerned, we had actually increased the team size in Q3. And we brought it back to the normal level in Q4, so you will see a Q-on-Q reduction, but the team has been based on our assessment of the overall book to be recovered. So we see that this number will continue, so this, the collection team’s trend, is expected to continue during this financial year.
Q: And just on the average ticket size across products, when I look at affordable housing, excluding MLAP, when I look at MSME, excluding fintech channel. There has been some increase in ticket sizes when I look at Y-on-Y comparison. So anything specific which is driving here? That's number one. And second is this cost of deposit which fell in this quarter and you said there was a one-time benefit of interest reversal. So excluding this, how would have cost of fund moved in this quarter?
A: I'll take the ticket sizes first. The average ticket size in group loans has gone up marginally. New customers contribution reduced from 43% to 39%. And we saw an increase in the repeat loans from 32% to 39%. The increase in ticket sizes in group loans -- in individual loans, ticket sizes have increased across as we are graduating group loans to individual loans at higher ticket size. This increase was about 3%. So it's not a very significant increase in the ticket size of individual loans.
Q: Firstly, on MSME loans, can you give some details on the fintech partnership that we have? What is the book size that we have from that partnership? What are the average needs, et cetera? And what is the customer profile that we are targeting in the MSME fintech vertical?
A: MSME fintech, we recently started this portfolio and we have already tied up with two partners and there are two in the pipeline. And the book size is very small. We are also hoping to grow this through the fintechs and also on our individual capacity.
Q: And how should we think about the cost of funds going forward? This quarter, there is a one-off. So adjusted for one-off, probably the cost of funds is 7.4%, roughly. How should we project cost of funds in FY'25?
A: Cost of funds will see a marginal uptake because we have recently announced a rate hike. TD rates have increased by about 25 basis points in March '24. However, when compared to Q-on-Q, we have seen a substantial reduction in cost of funds. We have earlier said that around 17 basis points reduction is due to interest rate reversal on the holding company deposits, and while the balance 8 basis points is due to improved CASA and retail deposits. So our view is until the repo rates start coming down, we assume the cost of funds to remain elevated. We don't wish to predict, as several external factors come into force on the cost of funds.
Q: Just two questions. One is on this FIG lending which we have seen a very strong growth. So if you can give some color, what comfort we are having there? Was it just a liquidity deployment? Is it short term, long term? If you can give some color on that.
A: So the FIG lending is doing well for us. We have grown substantially there. Our portfolio size is around INR1,730 crores. We will be taking this up a little further to balance our secured asset book. And the customer segments would be the NBFCs that we are targeting and the AA rated companies and AA plus rated companies.
Q: The secured book is now at roughly 30% of the overall advances. How do you expect this to trend over FY25 and '26?
A: The guidance given for the two years is around 60-4; 60 would be in the unsecured and 40 in the secured. We will be meeting that guidance in the next two years. We have already reached 0.2 and we are seeing an increasing trend there. We have also introduced two secured as verticals like gold, vehicle finance, MSME, and advice strategy. It's doing well for us.
Q: How are you accounting for the income from the off-balance sheet book, the IBPC and securitized loans?
A: On securitization, we take it into income. IBPC helps us in containing our cost of funds.
Q: Just two questions from my side. One on the individual loan side. We've been going this piece at pretty accelerated pace from last five, six quarters. So can you just throw some light on, let's say, the part of the portfolio or maybe some sort of asset quality indicators in this book?
A: For individual loan, you know, these are customers who have mostly graduated from group loans. We do about 10% to 12% of open market acquisition on the individual loan side. Most of these customers have a two-to-three-year track with the bank. So the asset quality for individual loans is better than the group loan asset quality. And that has also given us the confidence of growing this at a rate of 40%. In terms of par, it is lower than the group loan par. Our average remains to be in the range of 1.3 to 1.4.
Q: And my next question is on the NIM guidance which we have given of 9%. Now given we intend to grow our secured book at a faster clip over the next two years. So how do you see this NIM behaving over the next let's say six or seven quarters? I mean, naturally your yields under secured book will be lower. So how one should look at the NIM's trajectory going ahead?
A: Yes, as the secured book increases NIM's will
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
