ESAF Small Finance Bank’s shares dropped by over 7% following the release of its Q2 FY25 financial results. While the bank reported robust growth in its business and deposits, a decline in net interest income (NII) and increased slippage impacted overall profitability, leading to a negative market reaction.
Key Financial Highlights for Q2 FY25:
- Business Growth: Total business grew by 17.0% YoY to ₹40,829 crore, compared to ₹34,906 crore in Q2 FY24.
- Advances: Gross advances rose by 21.3% YoY to ₹18,340 crore, with the total loan book standing at ₹19,216 crore, up 10% YoY. Micro loans contribute 62% of the loan book.
- Deposits: Total deposits grew by 24.1% YoY to ₹21,613 crore, with CASA deposits increasing by 69.3% YoY to ₹5,319 crore. The CASA ratio improved to 24.6% from 18.04% in Q2 FY24.
- Profit Metrics: NII decreased to ₹540 crore from ₹597 crore in Q2 FY24, impacted by changes in loan mix and increased slippage. Net interest margin (NIM) stood at 8.6%.
- Pre-Provision Operating Profit (PPOP): Reduced to ₹143 crore from ₹254 crore in Q2 FY24.
The decline in NII and PPOP, despite strong growth in deposits and advances, indicates challenges in profitability and asset quality. The market reaction reflects investor concerns over these mixed results and the bank’s ability to manage loan slippages and improve profitability in the coming quarters.
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