Rumours Of CFO Leaving The Co Are Floated By Entities That Don't Want Stock To Do Well: AU SFB

Summary

In this discussion, Sanjay Agarwal, Managing Director of a small finance bank, addresses rumors about the bank's CFO and provides insights into the bank's financial performance. Despite challenges in unsecured loans and microfinance institutions (MFIs), Agarwal highlights that the fourth quarter has shown improvements, signaling hope for a better future. He also discusses the bank's asset quality, growth in retail and commercial banking, and competitive position in the market. The bank remains focused on building trust and executing its strategy, even as competition intensifies in the banking sector.

Takeaways

• 😀 The Nifty Bank has been on a positive streak, rising for seven consecutive days, showing a growth of 8.5% over the past week.
• 😀 There are rumors about the CFO of the bank, but the managing director, Sanjay Agarwal, refutes these claims, stating that they are organized efforts to damage the bank's reputation.
• 😀 The small finance bank has been facing business challenges, especially with unsecured loans and microfinance institutions (MFIs), but they are seeing a positive shift in quarter 4.
• 😀 Quarter 4 is showing the best performance of the year, with stronger growth in retail assets like MBL, affordable housing, and gold loans, compared to earlier quarters.
• 😀 The MFIs remain a concern area, but Sanjay is optimistic that the challenges will subside by quarter 1 or quarter 2 of the following year.
• 😀 The bank has minimal exposure to unsecured loans, apart from its credit card segment, which has seen some internal discipline challenges.
• 😀 There are no major concerns regarding the secured retail asset book, as the bank is not witnessing significant slippages in this sector.
• 😀 Sanjay Agarwal remains cautious about providing detailed guidance on credit costs or NPAs until the end of the financial year, which is still a few days away.
• 😀 The bank's margins are expected to remain stable, with a cost of funds and return on equity in the guided range of 5.8-5.9% and 1.5-1.6%, respectively.
• 😀 Despite operating in a competitive market, the bank has successfully built a strong deposit franchise and reached a major milestone of crossing ₹1 lakh crore in deposits, which is a significant achievement for a small finance bank.

Q & A

What is the performance of the Nifty Bank over the past seven days?

The Nifty Bank has been up for the seventh straight day, showing an increase of 8.5% over the last seven days.

What has been the concern regarding rumors about the CFO's resignation at the bank?

The bank has addressed rumors regarding its CFO's resignation, clarifying that the CFO has been with the bank for 15 to 16 years, and the rumors are part of a larger, organized effort to undermine the bank's success.

How does the bank's management view the rumors affecting its stock performance?

The management believes that the rumors are spread by individuals or groups trying to disrupt the bank's performance in the stock market, but they emphasize that the focus of the bank is on trust and stability, not just stock performance.

What has been the impact of the banking sector's challenges on asset quality and credit costs?

This year, the bank faced challenges such as marginal growth, tough recovery, and asset quality issues. However, there has been hope for improvement as the fourth quarter has shown stronger results than previous quarters.

What is the outlook for unsecured loans and MFI (Microfinance Institutions) sectors going into the next quarter?

The bank expects improvement in the unsecured loans and MFI sectors, with hopes that the pain from these sectors will ease by the first or second quarter of the following year.

How did the bank's secured retail asset book perform in the fourth quarter?

The secured retail asset book, including segments like gold loans and affordable housing, showed stronger performance in the fourth quarter compared to the earlier parts of the year.

What is the bank's guidance regarding credit costs and NPAs (Non-Performing Assets) for the current year?

The bank prefers to reserve detailed guidance on credit costs and NPAs until after the financial year ends, as there are still 10 days left in the March quarter. They had previously guided a range for the year, which is expected to hold unless extra provisions are needed for the MFI or credit card books.

What is the expected margin trend for the bank in the current quarter?

The bank's margin is expected to remain in the same range as previously guided, at around 5.8-5.9%. The return on assets (ROA) is expected to stay between 1.5-1.6%, subject to any additional provisions.

How does the competition affect the bank's strategy in the small finance banking space?

The bank does not believe it benefited from operating in a non-competitive environment. It acknowledges strong competition across India, but its strategy of focused execution, building a robust retail asset and deposit franchise, and maintaining a disciplined approach has enabled it to remain strong in the market.

What are the future plans for the bank, particularly regarding its universal banking license?

The bank has applied for a universal banking license, marking a significant step in its growth strategy. Despite the challenges, the bank remains confident in its future prospects and aims to become one of the most important players in the banking industry.