Equitas Small Finance Bank (ESFB) has reported significant growth in its key financial metrics for the quarter ended September 30, showcasing resilience and improvement across various segments.

Advances and Deposits

ESFB's gross advances reached ₹39,145 crore as of September 30, marking a 4.08% quarter-on-quarter (QoQ) and 8.58% year-on-year (YoY) growth. The bank's disbursements saw a substantial improvement, rising to ₹5,381 crore, up 53% sequentially and 11% YoY.

Total deposits stood at ₹44,094 crore, growing 10.92% YoY but showing a marginal decline of 0.57% QoQ. The bank's CASA (Current Account Savings Account) deposits increased to ₹13,622 crore, improving the CASA ratio to 31% from 29% in the previous quarter.

Key Financial Metrics

The bank's cost of funds declined to 7.35% from 7.49% in the previous quarter, indicating improved financial efficiency.

Microfinance and Micro Loans

The microfinance and micro loan segment showed signs of stabilization:

• Advances stood at ₹3,414 crore, showing a 39.42% YoY decline but only a 3.46% sequential decline.
• Collection efficiency in microfinance improved to 98.56% from 97.97% in the previous quarter.
• Fresh overdue accounts in microfinance dropped significantly to ₹30.16 crore from ₹97.48 crore in April.

Asset Quality and Credit Management

ESFB took several steps to manage its asset quality:

• Sold non-performing assets worth approximately ₹216 crore to an Asset Reconstruction Company.
• The credit-deposit ratio improved to 84.14% from 79.91%.
• Net slippages in the Small Business Loan segment decreased to 2.23% from 3.22% in the previous quarter.

Loan Portfolio Composition

As of September 30, ESFB's loan portfolio comprised:

• 9% Micro Finance & Micro Loans (Unsecured)
• 91% All Other Loans (Secured)

This composition reflects the bank's focus on secured lending while maintaining a presence in the microfinance sector.

Equitas Small Finance Bank's quarterly performance demonstrates its ability to navigate challenging market conditions while focusing on growth and asset quality improvement. The significant increase in disbursements and the improvement in collection efficiency are particularly noteworthy, indicating potential for sustained growth in the coming quarters.

Equitas Small Finance Bank has reported strong performance in its latest quarterly results, showcasing significant improvements in key financial metrics. The bank's CASA (Current Account Savings Account) deposits and cost efficiency have shown notable progress, indicating a positive trajectory for the institution.

CASA Growth and Deposit Performance

Equitas Small Finance Bank has demonstrated impressive growth in its CASA deposits:

The bank's CASA ratio improved to 31.00% in Q2, up from 29.00% in the previous quarter and 30.00% in the same period last year. This improvement indicates a strengthening deposit base and potentially lower cost of funds for the bank.

Cost Efficiency and Funding

The bank has also shown improvements in its cost metrics:

The reduction in funding costs from 7.49% in the previous quarter to 7.35% in Q2 suggests improved cost efficiency, which could positively impact the bank's profitability.

Advances and Asset Quality

The bank's gross advances showed positive growth:

The significant increase in disbursements indicates a recovery in lending activity. However, the Micro Finance & Micro Loans segment continued to show a decline, albeit at a slower rate:

The bank has also taken steps to address asset quality concerns:

• Sold NPA assets amounting to approximately ₹216.00 crore to an Asset Reconstruction Company during Q2.
• Improved collection efficiencies, with the 1-90 DPD (Days Past Due) in the MFI & Micro Loan segment showing consistent reduction.

Conclusion

Equitas Small Finance Bank's Q2 results reflect a strong performance in CASA growth and cost management. The improved CASA ratio and reduced funding costs indicate enhanced operational efficiency. While challenges persist in the Micro Finance segment, the overall growth in advances and disbursements suggests a positive outlook. The bank's proactive measures in managing asset quality further underscore its commitment to maintaining a healthy balance sheet.

Investors and stakeholders may view these results as indicative of the bank's resilience and potential for sustainable growth in the coming quarters. However, it will be crucial to monitor the performance of the Micro Finance segment and the bank's strategies to address the challenges in this area.