Equitas Small Finance Bank Reports Strong Q1 FY25 Growth Despite PAT Decline

On July 26, 2024, Equitas Small Finance Bank Limited announced the unaudited financial results for the quarter ending June 30, 2024. 

The bank reported a net income of ₹994 crore for Q1 FY25, reflecting an 11% year-on-year growth. Its Pre-Provision Operating Profit (PPOP) stood at ₹340 crore, showing a 9% year-on-year increase. Deposits grew by 35% year-on-year, with a significant 47% growth in retail term deposits. Additionally, Equitas improved its Provision Coverage Ratio (PCR) to 70% in Q1 FY25.

Key Highlights for Q1 FY25

The yield on gross advances improved by 13 basis points to 16.45% compared to the previous year. Gross advances saw an 18% year-on-year growth and a 2% quarter-on-quarter increase. The non-microfinance book experienced a 21% year-on-year growth, driven by a 35% rise in housing finance and a 27% increase in small business loans (SBL). Overall, deposits registered a strong growth of 35% year-on-year and 4% quarter-on-quarter.

Business Highlights

New products scaled up effectively, with merchant overdrafts and used car advances crossing  ₹1,100 crore and  ₹1300 crore, respectively, in Q1 FY25. Disbursements in Micro-LAP (part of SBL) grew by 78% year-on-year as portfolio indicators turned favourable. The CASA ratio remained stable at 31%, with current account balances growing 32% year-on-year. Retail term deposits showed a robust growth of 47% year-on-year, reaching  ₹16,128 crore.

Key Ratios

The Net Interest Margin (NIM) stood at 7.97%. The cost-to-income ratio was 65.75% in Q1 FY25, compared to 62.83% in Q4 FY24 and 65.05% in Q1 FY24. Return on Assets (RoA) and Return on Equity (RoE) for Q1 FY25 were 0.22% and 1.72%, respectively.

Profit and Loss

Net income, total operating expenses, and Pre-Provision Operating Profit (PPOP) for Q1 FY25 grew by 11%, 13%, and 9% year-on-year, respectively. However, Profit After Tax (PAT) stood at ₹26 crore for Q1 FY25, reflecting a significant decline of 87% year-on-year and 88% quarter-on-quarter. This drop was primarily due to the bank setting aside a floating provision of  ₹180 crore to strengthen its Provision Coverage Ratio (PCR).

About Equitas Small Finance Bank

Equitas Small Finance Bank is one of India’s largest small finance banks. It offers products and services designed for individuals with limited access to formal financing, as well as for affluent individuals, small and medium enterprises (SMEs), and corporations.

On July 26, 2024, Equitas Small Finance Bank Ltd’s share price opened at ₹88.62, touching the low of ₹84.00 as of 02:53 PM on the NSE. 

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