Ujjivan Small Finance Bank Q4 Review - Not So Prudent With Provisioning: Nirmal Bang
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Nirmal Bang Report
We have cut our earnings estimates on Ujjivan Small Finance Bank Ltd. by 71% and 40% for FY22E and FY23E, respectively.
Our sharp earnings cut is driven by expected impact on revenue and high provisioning requirements on account of expected slippages.
Given that collections in micro banking are 88% and 89% for the overall loan book, the slippages can be high.
We have therefore increased our non performing asset estimates quite sharply, leading to a 566 basis points cut in our FY23E return on equity.
To our surprise, the management has not taken any extra provisions during the quarter despite acknowledging stress build-up since the onset of the Covid-19 second wave.
We believe that this is not reflective of a prudent provisioning policy.
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