Shares of AU Small Finance Bank are down 10% on Monday, marking their biggest single-day drop since August 2021, after the company’s asset quality deteriorated during the December quarter.
The company’s Gross NPA stood at 1.98% from 1.91% during the September quarter. Net NPA for the company stood at 0.68% from 0.6% in the September quarter.
Net profit for the company also stood at ₹375 crore, which was lower than the CNBC-TV18 poll of ₹411 crore. Net profit was impacted due to higher provisions, which increased by 39% quarter-on-quarter.
Brokerage firm Citi has maintained its “neutral” stance on the stock but have cut their price target to ₹790 from ₹832 earlier. The brokerage attributed the asset quality deterioration to credit card stress and write-offs worth ₹120 crore along with lower recoveries.
Core Net Interest Margin (NIMs) were also under pressure as funding costs rose by 20 basis points, while yields moderated by 10 basis points.
Pressure in the March quarter will lead to NIMs settling at the lower end or below its guidance, Citi wrote in its note.
Out of the 27 analysts that track AU Small Finance Bank, 10 each have a “buy” and “sell” rating, while the other seven have a “hold” recommendation.
Shares of AU Small Finance Bank are locked in a 10% lower circuit at ₹637.1. The stock has declined in three out of the last four trading sessions and has declined 15% during that period.
Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
