Q4 First Cut: Stable operating performance, Covid-19 provisions dragged bottom line
* Loan book remained flat on a yoy basis (-1.7% yoy) at Rs290.8bn, whereas disbursements declined by ~18.1% yoy (~7% qoq) amid the lockdown in the last week of March’20.
* Small enterprises loan book fell by 6% yoy, however, 2W loans and gold finance book grew by ~13% and ~15% yoy, respectively, in an otherwise weak environment.
* Quarterly repayments remained flat at ~19.9%.
* Net interest income declined by ~3.7% yoy (4.6% qoq) to Rs9bn. Margins fell to ~12.3% against ~12.8% last quarter due to elevated cost of funds during the quarter.
* Asset quality was stable – Gross Stage 3 eased to 7.9% against 8.5%, Net Stage 3 at 4.2% against 5% last quarter, coverage ratio further improved to 46.5%. Improved trends also attributable to asset classification standstill since February 29, 2020.
* Management has highlighted their concerns over lockdowns due to Covid-19, however, has not clarified the total moratoriums availed by customers, which we believe would be elevated considering the nature of business.
* The company has reported a sharp surge in provisions by +70.2% yoy (+71% qoq) to Rs3.1bn, including Covid-19-specific provisions of Rs4.3bn. Provision reversal is likely in other buckets.
* PAT declined by 39.1% yoy (48.4% qoq) to Rs1.5bn, due to elevated provisions.
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