Ujjivan Small Finance Bank: Lowers Fiscal 2025 Loan Growth Guidance

Ujjivan Small Finance Bank Limited is an Indian SFB based in Bengaluru licensed under Section 22 (1) of the Banking Regulation Act, 1949. The company unveiled its financial performance for Q4FY24, showcasing resilience and growth despite ongoing economic challenges. However, the expected loan growth was around 25%. Therefore, due to stress building in some pockets of business, Ujjivan Small Finance Bank Ltd. lowered its fiscal 2025 loan growth guidance by 500 basis points.

Bank’s estimates:

The bank on an analyst presentation the previous Friday the lender expects the loan book to grow by 20% YoY by March 31, 2025. Alongside the lower loan growth target, Ujjivan Small Finance Bank’s latest guidance for FY25 also estimates a return on equity of 22%, about 200 basis points lower than the estimates made in May. Credit costs for the bank are expected to be at 1.7% in the current financial year, according to the latest estimates. This compares to the 1.4–1.5% credit cost estimated earlier. In regions like Punjab, Haryana, Southern Tamil Nadu, and Kerala, stress is visible due to delays in repayments from these regions. However, the Ujjivan Small Finance Bank performed better than the rest of the industry. For the microfinance industry, the CRIF Prismatic report notes that portfolios at risk in loans, which have been on the books for over 18 months, stood at 1.64% across India. In comparison, Ujjivan Small Finance Bank’s portfolio at risk in this category of loans was 0.84% as of March 31, 2024.

Stock Performance:

Ujjivan Small Finance Bank tumbled 5.27% to Rs 45.81 after the bank revised its loan book growth guidance for FY2024-25 downwards to 20% from nearly 25% announced earlier. This led to cuts in earnings projections for FY25. The stock fell 7.51 percent to hit a low of Rs 44.73 on BSE. Sanjeev Nautiyal will be taking up the role of MD and CEO of the SFB from July 1.  

Conclusion: Ujjivan Small Finance Bank shares are falling due to a plunge in target loan growth for FY24.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.