Cash News
Highlighting the bank’s current credit-deposit (CD) ratio that stands at around 86%, Sanjay Agarwal, Managing Director and CEO of AU Small Finance Bank, expressed confidence that the bank’s efforts in building its deposit franchise would help maintain this CD ratio, in an interview with CNBC TV-18.
However, excluding assets financed through institutions like NABARD and SIDBI, the actual ratio drops below 80%.
In Q2FY25, the bank reported a robust 42% year-on-year increase in net profit amounting to ₹571 crore. Net interest margin (NIM) were flat at 7.4% quarter-on-quarter.
Read the verbatim transcript of the interview.
Q: Give us some guidance going ahead, your credit-deposit ratio (CDR), came down to, I think, 85% odd in the past quarter. So where do you see this number stabilising at? Also on the cost of funds, I think you are guiding that it will fall by 10-15 basis points in the coming quarter. So do you believe your margins can hold at around 6% since you have just upsized your earlier guidance?
A: This quarter, to be honest, is one off quarter for us because one, we crossed ₹1 lakh crore deposit base in this quarter itself. We crossed one ₹1 lakh crore asset base in this quarter and then also we applied for the universal license. So this quarter actually signifies one of the most important quarter in the journey of bank. This quarter also, not only there was a growth of 12-13% in deposit also we were able to manage our cost.
Last quarter the cost was around 7.03 and we didn’t do any kind of deposit growth in quarter one and it was a very deliberate attempt, but quarter two we need the money and we grew in around ₹12,000 crore at an incremental cost of just 0.1 basis points think that helps us to really guide to the market that initially we were thinking to have a cost of around 7.2-7.25 on a yearly basis right but now this has helped us to really guide us, within the range of now 7.10-7.12 on a yearly basis. So that is really has given us hope that our NIM can be protected. And that is why we are guiding that our NIM can be around 6%.
Again our asset also has grown by 9% in first half, which is close to 40% of overall guidance. If you take out microfinance portfolio, then our yield on other assets also has gone up. So the both together, I strongly believe that our NIM can be protected.
Q: You want to give us the CDR ratio that you’re looking for?
A: We are around 86%, but to be really honest, if you take refinance asset out of the calculation, because the money which you get from National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), the assets will be built through that money, we can take out from our asset base, then our CD ratio is below 80%. So I am quite confident that the way we are building our deposited franchise, we can protect CD ratio in the range of 80-85%.
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The company, which has a market capitalisation of ₹48,720 crore, has seen its shares decline 7% over the last year.
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