AU Small Finance BANK is a regional NBFC turned Small Finance Bank (SFB) which is a primary lender in vehicle finance, MSME and SME space in rural, semi-urban and urban centres in Western India.

AUBANK has a dominantly secured loan portfolio with a focus on small ticket size, secured and retail loans.

Post the NBFC crisis, pricing power has improved resulting in an increase in yields by ~200bp over the past two quarters. ~90% of the retail loans have an average yield of ~15%, and thus, risk adjusted yields have become attractive.

AUBANK has reached a total customer base of ~1.52m (+5.4x) while branch count has increased to 558 v/s 300 two years ago. The bank is focused on increasing the use of Business Correspondents (BC) and might add a few more.

The bank has guided for an AUM growth of 35-40% CAGR with a total assets base of ~USD10b by FY22. Further, it is targeting deposits to fund ~80% of the total AUM. The bank aspires to eventually become a 'Universal' bank.

AUBANK is swiftly increasing its focus towards high- yielding used vehicle segment and is capitalizing on under-penetrated opportunities in the MSME segment, thereby sustaining healthy growth momentum.

Further, the conservative underwriting approach, reduction in ticket sizes and lower LTVs should enable the bank to maintain strong control on credit costs. We expect AUBANK to deliver steady 43% earnings CAGR over FY19-21

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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