Utkarsh Small Finance Bank share falls 1% despite strong Q1 numbers

Shares of Utkarsh Small Finance Bank were down by nearly 1 percent at Rs 50.75 on August 9, despite the bank reporting a strong set of quarterly numbers.

Quarterly net profit rose 20.1 percent year-on-year to Rs Rs 107.5 crore, helped by a decline in provisions and contingencies. Net interest income—the difference between what a bank earns as interest and what it pays to depositors—rose 21 percent YoY.

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The bank’s net interest margin for the quarter was however lower at 9.2 percent as compared with 9.7 percent earlier. The bank expects that yield on advances would improve in the next few quarters with re-pricing of interest rates in microfinance, which is its lending segment. Operating profit was marginally higher at Rs 221 crore against Rs 213 crore. Provisions and contingencies were lower at Rs 77 crore against Rs 91 crore.

Its loan portfolio grew by 31.4 percent year-on-year to Rs 14,394 crore at the end of June with microfinance portfolio accounting for 63 percent of it. Deposits of the bank grew 36 percent year-on-year to Rs 13,967 crore. Its gross non-performing assets ratio stood at 3.13 percent at the end of June against 3.23 percent three months prior to that. Gross NPA was 5.73 percent a year back.

Management Commentary

Speaking on the results, Govind Singh, MD and CEO, Utkarsh Small Finance Bank said, “We are witnessing a healthy scaling up of our franchise towards microfinance and others retail loans i.e. MSME, housing and wheels segment (automobiles) as well as deposits build-up. Our endeavor is to be consistent in performance which leads us to focus on productivity and yield with granularity attached to it is the “Business-as-Usual” model for us.”

He said the Rs 500 crore raised through the recent IPO was adequate to fund growth plans, adding that Return on Assets and Return on Equity stood at a healthy 2.3 percent and 21.1 percent respectively during the quarter.

Stock Performance

The Utkarsh Small Finance Bank is a recent listing on the exchanges. The stock opened with a massive 60 percent premium over issue price on July 21, the listing day, attributing to the strong IPO subscription numbers and bullish market conditions. The IPO price band for the stock was Rs 23 to Rs 25.

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