AU Small Finance Bank - Merger Synergies To Be Realised Over Long Term: Nirmal Bang

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Nirmal Bang Report.AU Small Finance Bank Ltd. held an analyst meet to discuss the roadmap for the next three years up to FY27 and its strategy post-merger with Fincare Small Finance Bank, all approvals for which have been received and it will be effective from April 1, 2024.The bank has guided for scaling up its return on asset from 1.5% in Q3 FY24 to 1.8% by FY27, which it expects to achieve by way of expansion into higher RoA businesses and returns from investments in new businesses. It expects deposits to grow by 23-25% and loan growth to be same. Focus is being laid on improving branch profitability. Credit cost is expected to remain range-bound, with no major negatives expected. In our view, while in near term funding cost increase and merger integration costs could weigh on the return ratios, in the longer term, AU SFB will benefit from Fincare SFB’s presence in better yielding south geographies and higher yielding segments of micro finance, securities-based lending and gold loans. Post incorporating the merged entity numbers, we estimate loan book and profit after tax to grow at a compound annual growth rate of 29.1% and 27.7%, respectively over FY23- FY26E. We estimate RoA to improve to 1.7% by FY26E. We maintain ‘Buy’ on AU SFB with a target price of Rs 721 (three times December 2025E adjusted book value)..Click on the attachment to read the full report:.AU Small Finance Bank - Multiple RoA Expansion Levers Identified, Eyeing RoA Of 1.8% By FY27E: Axis Securities.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

AU Small Finance Bank - Merger Synergies To Be Realised Over Long Term: Nirmal Bang

RoA guidance at 1.8% by FY27, supported by product mix changes as well as returns from investments in new businesses

Choose a plan