"Suryoday Small Finance Bank’s financial results for the quarter ending December 2023 (Q3 FY24) were mixed. Key highlights include:
Gross advances grew by 40.5 percent year on year (YoY) in Q3 FY24, mainly fueled by strong disbursements in Vikas Loans (VL), commercial vehicle (CV) loans, and secured business loans.
The VL portfolio surpassed the Rs 2,000 crore mark, showing a 26 percent increase quarter on quarter (QoQ) in the December quarter. These are joint liability group (JLG) loans that have transitioned to individual loans and are covered under the credit guarantee scheme. The VL portion within the JLG portfolio is expected to increase to 50 percent from the current 46 percent.
Although deposit growth was subdued on a sequential basis, the notable sequential increase in the share of retail deposits, including current and savings accounts (CASA), to 82.5 percent, with CASA share improving to 18.5 percent, was encouraging.
However, the low-cost CASA share remains below the industry average. The bank also needs to address the high credit-to-deposit ratio, which stands at 111 percent.
Asset quality improved in FY23 following Covid-related stress, with the gross non-performing asset (GNPA) ratio maintained at 2.9 percent in Q3, after peaking at 11.8 percent in FY22.
However, the JLG portfolio, excluding VL, witnessed a QoQ increase of 50 basis points (bps) in the GNPA ratio to 5.8 percent, indicating some stress in the unsecured portfolio. As a result, the bank increased its provision coverage ratio by 380 bps QoQ to 54.3 percent.
Although absolute slippages increased compared to the previous quarter, the slippage ratio as a percentage of gross advances is on a declining trend and remained stable at the end of the 9M FY24. The credit cost ratio also stayed within the comfort zone of around 2 percent.
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