AU Small Finance Bank Ltd Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kunal Shah - CITI - Analyst : Yeah, congratulations. So firstly, when we look at it in terms of integration expenses, what we have highlighted of INR300 crores-odd. So out of that, we mentioned like INR77 crores is the stamp duty, another INR50 crores, INR60 crores, which will be EBITDA and balance has been already taken care of by Fincare. And when we look at it, the network, which is being given at 24, 21, on the merged business that is after taking into account those merger-related expenses?

Question: Kunal Shah - CITI - Analyst : Okay. So it has already been factored in pricing. And incrementally, what we will see by way of the integration will be only INR50 crores to INR60 crores-odd of the expenses. The BAU expenses.

Question: Kunal Shah - CITI - Analyst : The rest all is accounted for now.

Question: Kunal Shah - CITI - Analyst : Okay. Because I was just seeing like in terms of like what we expected as a traditional transactional (multiple speakers)

Question: Kunal Shah - CITI - Analyst : Sure. And secondly, in terms of the segment-wise ROA, so it's a quite interesting one in terms of like 1.6% ROA. and we had given the retail and the commercial no doubt Fincare will get added into this, which will be relatively ROA accretive. But besides this, where could we see the levers in terms of what we are seeing like, say, credit card? it's an SCR drag of almost 27-odd basis points, and I think the regulatory drag would also continue. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2024 / 12:00PM, AUFI.NS - Q4 2024 AU Small Finance Bank Ltd Earnings Call Would there be any other levers besides Fincare out there and the OpEx out there, or if you have a sense at this slide, particular slide, which is the area of emphasis for this program.

Question: Kunal Shah - CITI - Analyst : And credit card, we are not expecting much?

Question: Kunal Shah - CITI - Analyst : Okay. Thank you, and all the best.

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : Yeah, hi. Thanks for the opportunity. Just a couple of questions. First, in terms of (inaudible), if you could just highlight any of the business that you have made for the rest of the year, you mentioned that you are trying to adjust to --

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : Sorry. Is it now better?

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : So I will just -- first is, I just wanted to understand on used any of the products wherein you have to treat the yields on the present and how -- if you could just highlight in terms of which product front and what period adjustment that you made, which is first? And then probably, I go ahead with the second question.

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : So just one follow-up on this, do you see further room for a hike in rates, probably we are probably done with one leg and now that it will be more about this percent mix changes that you highlighted of the some room still left on yield adjustments that you can make?

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : Got it. Just second thing on one clarification. The INR300 crores that you said on the merger expenses is the large part of that is already done. So INR50 crores, INR60 crores per year is life or only charge of INR50 crores, INR60 crores is left.

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : Okay. So INR50 crores, INR60 crores over the next two years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2024 / 12:00PM, AUFI.NS - Q4 2024 AU Small Finance Bank Ltd Earnings Call

Question: Prakhar Argawal - Elara Securities Pvt Ltd - Analyst : Okay, that is it from my side. Thank you.

Question: Nitin Aggarwal - Motilal Oswal Securities Ltd. - Analyst : Yeah, hi. Am I audible?

Question: Nitin Aggarwal - Motilal Oswal Securities Ltd. - Analyst : Yeah, hi. Good evening, everyone, and congrats on good results. One question is on the other income, like, if I look at the fee income traction for us has been very, very strong. And it has been only right getting better. So how sustainable really this is because a few intensity, if I just look at on a quarterly basis on the total assets, it's already on the high side. And so how sustainable is this? And what other levers do you see going ahead in FY25?

Question: Nitin Aggarwal - Motilal Oswal Securities Ltd. - Analyst : Thank you so much. And the other question is around --

Question: Nitin Aggarwal - Motilal Oswal Securities Ltd. - Analyst : Right, of course. And the other thing on securitization, I'd like -- because you talked about like growing 25% or 30 basis over the next two, three years. So should we expect a lower securitization now going forward? You will be able to like mobilize more resources and make Fincare branches also as partners of AU Bank. So how should we like --

Question: Nitin Aggarwal - Motilal Oswal Securities Ltd. - Analyst : All right. Thanks, and I wish you all the best.

Question: Param Subramanian - Nomura - Analyst : Yeah. Hey, thanks for taking my questions. My first question is on the margin. Could you explain the quarter-on-quarter walk for the margin because the funding cost is only up 8 basis points, since we are seeing 5.5 versus 5.1. If you could break that up, yeah.

Question: Param Subramanian - Nomura - Analyst : Okay.

Question: Param Subramanian - Nomura - Analyst : Okay. So the lower margin last quarter was 5.3%?

Question: Param Subramanian - Nomura - Analyst : Okay. And just the comment you made that will have on a blended basis post-merger --

Question: Param Subramanian - Nomura - Analyst : Okay, fair enough. So on the fee line, so the comment you made on credit cards where you are saying that the pace of issuance is going to be flat by going to next year. So we can see that credit card fee is about INR300 crores in your P&L and OpEx is about INR600 crores that you called out. So how do these numbers get affected next year? Is it more positive than negative.

Question: Param Subramanian - Nomura - Analyst : So that will be less, in my opinion.

Question: Param Subramanian - Nomura - Analyst : Okay, fair enough. So we are looking to close this or this sort of new territory that we are seeing when, you know, you're actually quarter on quarter directly as well as year-on-year fee is very strong. Going into next year, also, you actually expect added sort of to be made despite the credit card is not going down. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2024 / 12:00PM, AUFI.NS - Q4 2024 AU Small Finance Bank Ltd Earnings Call

Question: Param Subramanian - Nomura - Analyst : Fair enough. Thanks a lot. Thank you.

Question: Manish Shukla - Axis Capital Limited - Analyst : Good evening and thank you for the opportunity. What is the microfinance yield or the rate at which you're lending credit?

Question: Manish Shukla - Axis Capital Limited - Analyst : So Rajeev, if I were to put any kind of a spread or yield care, would you still be keen to take another 5% to 10% of the book or you want to revisit that?

Question: Manish Shukla - Axis Capital Limited - Analyst : (inaudible)

Question: Manish Shukla - Axis Capital Limited - Analyst : Hello?

Question: Manish Shukla - Axis Capital Limited - Analyst : Sorry. What I was saying is that the rebranding of Fincare touch points to AU touch points, has that already happened or is it in progress?

Question: Manish Shukla - Axis Capital Limited - Analyst : Okay. Those are my questions. Thank you.