ESAF Small Finance Bank Reports Loss in H1 Amid Strategic Shift to Secured Lending
ESAF Small Finance Bank reported a net loss of ₹115.81 crores for Q2, narrowing from ₹190.07 crores in the previous year. H1 net loss stood at ₹197.00 crores. Despite losses, the bank showed growth with gross advances up 4.3% to ₹19,137.00 crores and deposits increasing 5.9% to ₹22,894.00 crores. The bank has strategically shifted towards secured lending, now comprising 86% of its portfolio. CASA deposits grew 13.7% to ₹6,046.00 crores, with the CASA ratio improving to 26.4%. The bank maintains a strong capital position with a Capital Adequacy Ratio of 22.4%.
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ESAF Small Finance Bank , a prominent player in India's small finance banking sector, has reported its financial results for the second quarter and first half, revealing a strategic shift towards secured lending amidst challenging market conditions.
Financial Performance
The bank reported a net loss of ₹197.00 crores for H1, compared to a loss of ₹521.00 crores in the previous fiscal year. This improvement in the bottom line comes despite headwinds in the banking sector.
For Q2, ESAF Small Finance Bank posted a net loss of ₹115.81 crores, narrowing from a loss of ₹190.07 crores in the corresponding quarter of the previous year.
Growth in Advances and Deposits
Despite the losses, the bank demonstrated resilience in its core business:
- Gross advances grew 4.3% year-on-year to ₹19,137.00 crores
- Deposits increased 5.9% to ₹22,894.00 crores
Strategic Shift to Secured Lending
A significant development is the bank's strategic pivot towards secured loans:
- Secured loans now comprise 86% of the portfolio, up from 61% previously
- This shift aims to improve asset quality and reduce risk
CASA Growth and Deposit Profile
The bank reported strong growth in its low-cost deposits:
- CASA deposits grew 13.7% to ₹6,046.00 crores
- CASA ratio improved to 26.4% from 24.6% last year
- Retail deposits now constitute 96% of total deposits, up from 93% previously
Asset Quality and Capital Adequacy
Asset quality metrics showed mixed trends:
- Gross Non-Performing Assets (GNPA) ratio stood at 6.9%
- Net Non-Performing Assets (NNPA) ratio was 3.8%
The bank maintains a strong capital position:
- Capital Adequacy Ratio: 22.4%
- Tier I Capital Ratio: 16.9%
Key Financial Metrics
| Metric | H1 Value |
|---|---|
| Net Interest Margin | 5.9% |
| Cost-to-Income Ratio | 77.9% |
| Return on Assets | -0.74% |
| Return on Equity | -21.4% |
Operational Highlights
ESAF Small Finance Bank continues to expand its reach:
- Operating through 788 banking outlets
- Presence across 24 states and 2 Union Territories
- Serving 97.8 lakh customers
- Focus on rural and semi-urban markets
Management Commentary
Kadambelil Paul Thomas, Managing Director & CEO, commented on the results: "The consistent growth in our business and the healthy rise in CASA deposits reflect the deep and enduring trust our customers place in ESAF Bank. Our secured portfolio continues to gain strong traction, driven by growth in gold, mobility, Agri and mortgage loans. These pillars position us well for sustained, quality-led expansion."
The bank's strategic shift towards secured lending, coupled with its strong deposit franchise and capital position, suggests a focus on building a more resilient business model. While the current financial performance shows challenges, the bank's efforts to improve asset quality and expand its secured loan portfolio may pave the way for improved profitability in the future.
Investors and stakeholders will likely keep a close eye on how these strategic initiatives translate into financial performance in the coming quarters.
Historical Stock Returns for ESAF Small Finance Bank
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -0.74% | -1.97% | -4.91% | -13.57% | -30.99% | -60.98% |
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