The bank has reported advances of Rs 8,650 crore for the quarter ended March FY24 (including inter bank participatory certificates (IBPC) of Rs 400 crore), growing 14 percent over the previous quarter and 41 percent over the year-ago period. Disbursements at Rs 2,340 crore increased by 31 percent QoQ and 39 percent YoY, while deposits grew by 20 percent QoQ and 50 percent YoY to Rs 7,775 crore for the quarter. The CASA ratio has improved by 1.6 percent QoQ and 3 percent YoY to 20.1 percent in Q4 FY24. The disbursements in FY24 of over Rs 6,900 crore increased by 36 percent compared to FY23 on continued momentum in Vikas Loan as well as retail assets disbursements.
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SURYODAY_09052024190035_SSFB_Intimation_in_relation_to_press_release_sd.pdf (452.1 KB)
Excellent results posted by SSFB for Q4
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while Q4 result is excellent. Company seems to be firing with all cylinder, but Pledged percentage 22.4 % , DII reducing stake is concerning.
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Investment thesis of Suyryodaya Small Finance bank:
Disclaimer: You can assume I am biased.
Founder is doing few things which I find it exceptional
- Unsecured loans [MFI] will be profit maximizing segment and secured loan business will provide stability and scalability to the business.
No other bank or NBFC has either taken a) CGFMU insurance cover or b) Creating Countercyclical provision of 5-6%
- By taking CGFMU cover its converting unsecured loans into Quasi secured loan and fixing the maximum loss at 3% of book [provided total NPA remains maximum at 15%].
- Counter cyclical provision : Bank is planning to create an additional contingent provision over and above regular provision. Bank wish to create 5% to 6% contingent provision by FY2026 by creating 1.5% contingency provision every year. [i**n addition to taking CGFMU cover, so in effect even in case of 20% credit cost event, bank will suffer only 3% credit cost in that year]**
- In case of Secured loans, majority of current book is focused on credit tested customers and accordingly yields are restricted to 12-13%. At the same time management has launched and testing various high yields products like Micro housing loans, Micro LAP, Small Business loans etc.
- Its not building extensive liability branches and not spending disproportionate amount in raising CASA. On the contrary in will rely on granular term deposits and other stable sources of finance. This will help it to keep the Opex low. Almost everyone is worried about whether Suryoday can build low cost CASA, but its immaterial. What is required is can they build granular book, even at 1-2% extract cost compared to top bank. Suryoday cannot match the low cost of funds of top private banks and PSU banks atleast for next 7-10Y. When business model is based on serving underserved and unserved customers and not prime customers like top private banks, then CASA is NOT MUST to have BUT ONLY GOOD TO HAVE. What is MUST IS Granular liabilities and NOT dependence on WHOLESALE LIABILITIES.
Link to full note: Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.
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Ujjivan in its analyst day warned of sytem wise stress. Suryoday for long is guiding for 2% credit cost as new normal. Looks like next one year will be time correction for all MFI stocks till market adjust to their new credit cost. Their Yields already factor in high credit cost and Suryoday in particular has CGFMU cover too [credit insurance cover] so it should be well protected for credit cost beyond 3%. x.com
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Ujjivan small finance bank reported 1.7% credit cost
Great growth YoY, however, disbursement is down 26% QoQ.
Any views why this could be the reason or should wait for management commentary?
First quarter is generally slow for financial institutions, that may be the reason.
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