Equitas Small Finance Bank Q4 Review - Earnings Inline Despite One-Offs; Business Growth Steady: Motilal Oswal

Motilal Oswal Report

Equitas Small Finance Bank Ltd. reported in-line earnings for Q4 FY24 at Rs 2.08 billion (up 9.3% YoY). However, adjusted for one-off items, the bank reported a profit after tax of Rs 2.33 billion.

Assets under management growth was steady at 21% YoY/3% QoQ to Rs 337 billion, driven by healthy traction in most segments (barring non-banking financial company and new CV). The management expects credit growth to remain robust at 25% YoY in FY25.

Deposit growth was strong at 42% YoY/12% QoQ, led by healthy growth in term-deposits and current account and savings account. The CASA mix moderated 74 bp QoQ to 32%. Cost of funds rose 8 bp QoQ to 7.44%, while net interest margins dropped 20 bp QoQ to 8.17%.

Slippages were elevated on one-time classification of the co-borrower non-performing asset. Gross/net non-performing asset ratios, thus, increased 8 bp/4 bp QoQ to 2.61%/1.17%. Provision coverage ratio was stable at 56%.

We maintain our FY24E/FY25E EPS and estimate FY26 return on asset/return on equity of 2.0%/17.4%. Maintain Buy with a target price of Rs 125 (1.9x times FY26E adjusted book ).

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