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Asset quality stable; Retail AUM growth steady while wholesale growth moderates
AUBANK has released its business update for 4QFY20. Below are the key highlights:
* Gross AUM increased 28.4% YoY/4.2% QoQ to INR311.3b led by ~39% YoY/7.5% QoQ growth in the retail book. Wholesale growth remained flat QoQ (2% YoY decline) to INR50b. Thus, in 4QFY20, retail AUM constituted ~84% of the total AUM (v/s 81% in 3QFY20).
* Total deposits (incl. CD) grew 34.7% YoY/9.6% QoQ to INR261.6b. However, CASA ratio (excl. CD) stood at 16% (v/s 17% in 3QFY20). Average cost of funds for FY20 stood at 7.69% (v/s 7.87% in FY19).
* On the asset quality front, GNPA increased by 2bp QoQ to ~1.9% while NNPA declined sequentially by 4bp to 0.97%. Thus, total provision coverage improved to 49% (v/s 46.8% in 3QFY20).
* Other Highlights: (a) Tier 1 ratio improved to 18.5% (CAR at 21.3%), (b) LCR stood at 137% as at Mar’20, (c) Surplus liquidity on the balance sheet stands at INR49b.
* Valuation and view: AUBANK has reported strong deposit growth numbers in an environment where the faith of depositors is already fragile. The bank has maintained strong surplus liquidity of INR49b and having LCR of 137% places it in a comfortable liquidity position. AUBANK has also reported stable growth trends in its retail portfolio despite the lockdown for a few days in Mar’20. Overall, we expect FY21E loan growth to get impacted due to the outbreak of COVID-19, which will drive the slowdown in consumption-linked loans. On the asset quality front, we expect delinquencies to increase in both vehicle/MSME portfolios over the next few quarters. We, thus, revise our TP to INR800 (4x Sep’21BV) and maintain Buy rating on the stock.
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