AU Small Finance Bank eyes 30% asset growth over five years

AU Small Finance Bank plans to grow its balance sheet (assets) by 30% year-on-year for five years. It plans to raise new equity in the current financial year (FY23) to support the growth of the business.

The Jaipur-based lender saw a 34% year-on-year growth in its assets to Rs 69,078 crore at the end of March 2022 from Rs 51,591 crore a year ago. Its asset base was Rs 9,781 crore at the end of March 2017.

Sanjay Agarwal, Managing Director and CEO said Trade standard that with annual deposit growth of 35-40%, the lender would increase the asset portfolio by 30% and profits by 25% year-over-year for five years.

While its current capital adequacy ratio at 21% is well above the minimum regulatory standards of 15%, the bank plans to raise new equity in the current financial year depending on market conditions.

The bank wants to raise capital this fiscal year to support the growth of the business for two years, Agarwal said. Its Tier I capital ratio of 19.7% (21.5% in March 2021) against a minimum requirement of 7.5%.

The lender has announced its intention to give away one free share for one share held for FY22. This should broaden the paid-up capital base while retaining a portion of earnings.

Asked about the approach to building a low-cost deposit base, Agarwal said the share of current account and savings accounts (CASA) in total deposits had increased to 37% by the end of March 2022, against 23% a year ago. Today, the bank is striving to increase this share to more than 40%.

Regarding plans to become a universal bank, Agarwal said that there is a desire to become a universal banking entity in the long term. The bank would review RBI’s assessment of its capacity before making a decision in this regard. The bank spent five years as a small corporate bank to qualify for a universal banking license.