Suryoday Small Finance Bank has reported robust growth in both advances and deposits for the first quarter, while working towards stabilizing its asset quality.

Strong Growth in Advances and Deposits

The bank's gross advances stood at ₹10,846.00 crore, marking a significant year-on-year growth of 20.00%. On the liability side, the deposit base expanded to ₹11,312.00 crore, representing an impressive 39.00% increase compared to the previous year.

Improvement in Retail Deposits

Suryoday's retail deposits now constitute 82.00% of the total deposit base, up from 79.00% a year earlier. This growth has been driven by deposits garnered through digital channels, which have reached ₹1,000.00 crore with a daily run rate of ₹3.00 crore.

Asset Quality and Collection Efficiency

The bank's Gross Non-Performing Assets (GNPA) stood at 8.50%, while Net Non-Performing Assets (NNPA) were at 5.60%. However, the bank has a receivable of ₹584.00 crore under the Credit Guarantee Fund for Micro Units (CGFMU) scheme, which covers almost 100% of the GNPA along with existing provisions.

Collection efficiency in the inclusive finance segment has shown improvement, with the current bucket collection efficiency increasing from 97.50% to 98.40%.

Strategic Initiatives and Future Outlook

Baskar Babu Ramachandran, Managing Director and CEO, highlighted several strategic initiatives:

1. Shift from group lending to individual lending with strengthened underwriting processes
2. Prudent risk management practices with wider coverage of cyclical events
3. Focus on secured retail assets business
4. Expansion of digital deposit sourcing channels

The bank expects credit costs to be around 1.20% for the year and anticipates slippages to reduce by ₹50.00-70.00 crore in the next quarter.

Portfolio Mix and Future Plans

Suryoday maintains a 55-45 mix between secured and unsecured assets. The bank plans to continue focusing on Commercial Vehicle (CV) and mortgage segments for its retail asset secured business growth.

Conclusion

Despite facing challenges in the inclusive finance segment, Suryoday Small Finance Bank has demonstrated resilience and growth in the first quarter. The bank's focus on digital initiatives, secured lending, and improving asset quality positions it well for sustainable growth in the coming quarters.

Management expects to see a substantial reduction in NPA accretion by the third quarter, subject to current trends continuing. With these strategies in place, Suryoday Small Finance Bank aims to create long-term value for all stakeholders while staying true to its mission of financial inclusion.

Suryoday Small Finance Bank (SSFB) has reported a mixed set of financial results for the first quarter, with revenue growth offset by a significant decline in profitability and deteriorating asset quality.

Revenue Growth

The bank's revenue for Q1 stood at ₹4.95 billion, showing a modest increase from ₹4.90 billion in the same period last year. This growth, albeit small, indicates the bank's ability to maintain its top-line performance in a challenging economic environment.

Profit Decline

Despite the revenue growth, SSFB experienced a substantial drop in net profit. The bank's net profit for Q1 fell to ₹353.00 million, down from ₹701.00 million in the corresponding quarter of the previous year. This represents a significant year-over-year decline of 49.64%.

Asset Quality Concerns

The bank's asset quality showed signs of stress during the quarter:

• Gross Non-Performing Assets (NPAs) rose to 8.46% from 7.16% in the previous quarter.
• Net NPAs increased to 5.64% from 4.58% quarter-over-quarter.

This deterioration in asset quality could be a contributing factor to the bank's reduced profitability and may require increased provisioning in the coming quarters.

Capital Adequacy

Despite the challenges, SSFB maintains a strong capital position. The bank reported a Capital Adequacy Ratio (CAR) of 24.61% for the quarter, well above the regulatory requirements. This robust capital base provides a cushion against potential future stresses and supports the bank's growth initiatives.

Credit Guarantee Scheme Impact

The bank has taken advantage of the Credit Guarantee Fund for Micro Units (CGFMU) Scheme, which has positively impacted its provisioning and capital adequacy calculations:

• NPA provisioning for the quarter was reduced by ₹538.80 million due to the CGFMU coverage.
• The bank's CAR of 24.61% benefits from the application of risk weights only on the uncovered portion of advances under the CGFMU scheme.

Management Commentary

Baskar Babu Ramachandran, Managing Director and CEO of Suryoday Small Finance Bank, stated in the bank's filing, "The Board of Directors have considered and approved the Unaudited Financial Results of the Bank for the Quarter (Q-1). We continue to focus on maintaining a strong capital position while navigating the current economic challenges."

Outlook

While Suryoday Small Finance Bank faces headwinds in terms of profitability and asset quality, its revenue growth and strong capital position provide some stability. The bank's participation in the CGFMU scheme offers some protection against potential loan losses. However, investors and stakeholders will likely keep a close eye on the bank's asset quality trends and its ability to return to stronger profitability in the coming quarters.

Note: The financial results mentioned in this article are based on the unaudited financial statements for the quarter, as approved by the bank's Board of Directors and subject to limited review by the statutory auditors.