Ujjivan Small Finance Bank (USFB) is poised for significant growth and transformation as it awaits a decision on its commercial banking license application from the Reserve Bank of India (RBI) by December. The bank, which has been making strides in diversifying its portfolio and strengthening its financial position, has outlined ambitious plans for expansion and capital raising.

Ambitious Loan Book Target

Ujjivan Small Finance Bank has announced its target to achieve a loan book of ₹1 lakh crore by 2030. This ambitious goal aligns with the bank's broader expansion strategy and vision for long-term growth.

Exploring New Sectors

As part of its growth strategy, USFB is exploring expansion into universal banking and housing finance sectors. This move indicates the bank's intention to diversify its offerings and tap into new market segments.

Awaiting RBI Decision

USFB expects the RBI to decide on its commercial banking license application by December, with the application reportedly in an advanced stage. This transition, if approved, would mark a significant milestone in the bank's journey, potentially opening up new avenues for growth and operational flexibility.

Expansion Plans

The bank has unveiled plans to expand its physical presence significantly over the next five years. USFB aims to open 400 new branches during this period, which would substantially increase its current network of 752 banking outlets across 26 states and union territories.

Capital Raising Initiative

To support its growth ambitions, USFB is considering raising ₹2,000.00 crore through a Qualified Institutional Placement (QIP) within the next two years. This capital infusion would bolster the bank's financial strength and provide the necessary resources for its expansion plans.

Strong Financial Position

USFB's financial performance has been robust, with the bank reporting its highest-ever profit after tax (PAT) of ₹1,281.00 crore, translating to a return on assets (ROA) of 3.50% and a return on equity (ROE) of 26.10%. The bank's gross loan book stood at ₹32,122.00 crore, while deposits reached ₹37,630.00 crore.

Diversification Strategy

The bank has been actively diversifying its loan portfolio, with the secured loan book share increasing to 44%. USFB aims to further increase this to 65-70% by FY30, indicating a strategic shift towards a more balanced and secure lending profile.

Digital Transformation

USFB has been investing heavily in digital initiatives, with 92.40% of total transactions now being digital. The bank has 41 lakh unique digital customers and has processed over 53 crore digital transactions.

Future Outlook

Looking ahead to FY30, USFB has set ambitious targets:

• Grow its liability base around 3 times
• Increase CASA percentage to around 35%
• Expand gross loan book to approximately ₹1 lakh crore
• Maintain net interest margins between 6% to 7%
• Reduce cost-to-income ratio to around 55%
• Achieve a return on assets of 1.80% to 2.00% and return on equity of 16% to 18%

Conclusion

Ujjivan Small Finance Bank's potential transition to a commercial bank, coupled with its expansion plans and strong financial performance, positions it for significant growth in the coming years. The bank's focus on diversification, digital transformation, and capital adequacy demonstrates its commitment to building a robust and sustainable banking franchise.

As USFB awaits the RBI's decision on its commercial banking license, it continues to strengthen its foundation, aiming to become a key player in India's evolving banking landscape.

Ujjivan Small Finance Bank (USFB) has reported a 24% quarter-on-quarter increase in profit to ₹103 crore for Q1, showcasing improved performance despite previous challenges.

Key Financial Highlights

• Profit: ₹103 crore, up 24% quarter-on-quarter
• Gross Loan Book: ₹33,287 crore, up 11% year-on-year
• Total Deposits: ₹38,619 crore, up 18.8% year-on-year
• Secured Book: ₹15,162 crore, up 63% year-on-year
• CASA Deposits: ₹9,381 crore, up 12.6% year-on-year

Loan Book and Deposit Growth

Ujjivan Small Finance Bank demonstrated strong growth in its loan book and deposit base:

• The gross loan book grew by 11% year-on-year to ₹33,287 crore
• Total deposits increased by 18.8% year-on-year to ₹38,619 crore
• The secured book segment showed remarkable growth of 63% year-on-year, reaching ₹15,162 crore
• The share of the secured book in the total loan portfolio increased significantly to 45.5% from 31.3% in the previous year

CASA and Profitability Metrics

• CASA deposits grew by 12.6% year-on-year to ₹9,381 crore
• The CASA ratio stood at 24.3%
• Return on Assets (RoA) improved to 0.8%
• Return on Equity (RoE) increased to 6.7%

Asset Quality and Provisions

• Credit cost for the quarter was ₹225 crore
• This included accelerated provisions of ₹23 crore

Capital Adequacy and Liquidity

The bank maintained a strong capital and liquidity position:

• Capital Adequacy Ratio stood at 22.8%
• Average daily Liquidity Coverage Ratio (LCR) was 156%

Future Outlook

The management has provided guidance:

• Expected advances growth of around 20%
• Projected credit cost in the range of 2.3% to 2.4% of average gross advances

Ujjivan Small Finance Bank's Q1 results demonstrate a significant improvement in profitability and continued growth in its loan book and deposit base. The bank's focus on expanding its secured loan portfolio has yielded positive results, with the secured book now constituting a larger portion of the total loan book. While the bank continues to make provisions, including accelerated ones, the overall financial health appears to be improving. The strong capital adequacy ratio and liquidity position provide a solid foundation for future growth. As the bank moves forward, maintaining this growth trajectory while managing asset quality will be key to achieving its projected targets.