Equitas Small Finance Bank’s Q4 Profit Surges Fivefold Driven by Expansion and Improved Asset Quality
Equitas Small Finance Bank has showcased remarkable financial resilience in its fourth quarter, achieving a five-fold increase in net profit to Rs 213 crore compared to Rs 42 crore during the same quarter last year. This impressive growth can be attributed to expanded business operations, improvement in asset quality, and a reduction in provisions, which dropped substantially from Rs 258 crore to Rs 124 crore. The bank also recorded a significant pre-provision operating profit of Rs 403 crore, marking a 30% rise from Rs 311 crore the previous year. Furthermore, the bank’s net interest margin has improved to 7.29%, growing 57 basis points from the preceding quarter, which indicates effective interest income management amid rising competition in the sector.
Despite the positive quarterly results, the annual net profit stands at Rs 103 crore, reflecting a decline of 30% from Rs 147 crore in the prior fiscal year. This decrease signals the challenges faced over the fiscal year, although the bank’s aggressive growth in gross advances, which surged by 22% year-on-year to Rs 46,165 crore, serves as a strong counterpoint. Notably, the non-microfinance portfolio is driving this growth, contributing 88% of the total advances, while the microfinance segment also experienced both sequential and year-on-year growth, reaching Rs 5,756 crore. A decrease in the gross non-performing assets (GNPA) ratio to 2.49% alongside an improved net NPA ratio of 0.68% further underscores the bank’s enhanced asset quality and risk management strategies.
In contrast, ESAF Small Finance Bank demonstrated considerable recovery, posting a net profit of Rs 23.5 crore in the fourth quarter, compared to a significant loss of Rs 183 crore a year earlier. This turnaround coexists with an increase in operating profit to Rs 241 crore from Rs 91 crore year-on-year. Although ESAF managed to reduce its annual net loss to Rs 166 crore from Rs 521 crore, the bank still faces challenges reflected in its gross NPA ratio of 5.4%, albeit a slight improvement from 5.6% three months prior. The bank’s ability to grow gross advances by 19.4% to Rs 22,426 crore and deposits by 11% to Rs 25,850 crore indicates a positive momentum in both clientele trust and operational capabilities, positioning the bank for future growth amidst recovery efforts in its asset quality management.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)