Equitas Small Finance Bank Q4 Results Review - Strengthened Balance Sheet Gives Comfort: Centrum Broking

Centrum Broking Report

Equitas Small Finance Bank Ltd. posted numbers below our expectations primarily due to asset quality, which led to increase in gross non-performing assets and credit cost.

However, as per the bank it has made additional non performing assets provision amount of Rs 385 million and absorbed the onetime impact of Rs 152 million as per the clarification sought from Reserve Bank of India. Resultantly, GNPA increased and came in at 2.61% which is higher by 8 basis points QoQ, net non-performing assets at 1.17% also increased by 4bps QoQ.

Net interest income for the quarter came in lower than our expectations primarily due to increase in cost of fund and higher securitisation during the quarter. Net advances grew by 20% and total deposits grew by 42% for FY24 leading to improvement in balance sheet liquidity.

CTI for the quarter was at 63.5% versus. 62.9% in Q3 FY24. Profit after tax at Rs 2.08 billion, (9.3% /2.8% YoY/QoQ) missed our expectations of Rs 2.18 billion. Capital to risk assets ratio came in at 21.7% versus 20.24% as of Q3 FY24.

We maintain our 'Buy' recommendation for the stock. We roll forward to FY26 from H1 FY26 and Equitas Small Finance Bank at two times adjusted book for FY26E, resulting in a revised target price of Rs 137.

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