Equitas Small Finance Bank Q1 Results: Bank Profit Crashes 86%, Dividend Date Announced
Equitas Small Finance Bank
Equitas Small Finance Bank Q1 Financial Results: Profit Decline and Dividend Updates
Overview of Q1 Results
Equitas Small Finance Bank (SFB) recently released its financial results for the April-June 2024 quarter, revealing a significant drop in net profit.
The bank’s profit plunged by 86.5% year-on-year, amounting to Rs 25.75 crore compared to Rs 191.2 crore for the same period last year.
This sharp decline in profitability has raised concerns among investors and analysts, despite some positive developments in other areas of the bank’s performance.
In contrast to the dramatic fall in profit, Equitas SFB’s total interest income showed a robust increase. For the first quarter of FY 2024, total interest income surged by 19.6% year-on-year, reaching Rs 1500.95 crore, up from Rs 1253.96 crore in the previous year.
This growth in interest income reflects the bank’s ability to expand its lending portfolio and manage its interest rate margins effectively.
Operating Expenses and Total Income
During the same quarter, Equitas SFB’s operating expenses increased to Rs 669.79 crore, up from Rs 602.38 crore a year earlier.
This rise in expenses could be attributed to various factors, including increased costs associated with branch expansions, technology investments, and personnel costs, which might have impacted the overall profitability despite higher income.
On a brighter note, the bank’s total income for Q1 grew by 20% year-on-year to Rs 1709.65 crore, compared to Rs 1425.32 crore in the same quarter last year.
This increase in total income indicates that the bank’s overall revenue-generating activities are performing well, even though net profit margins have been significantly squeezed.
Asset Quality and Loan Growth
Equitas SFB’s asset quality remained relatively stable with the gross Non-Performing Asset (NPA) ratio showing little change. It was 2.73% for the June 2024 quarter, marginally down from 2.75% in the previous year.
The net NPA ratio, however, demonstrated an improvement, decreasing to 0.83% from 1.18% a year ago. This reduction in net NPA ratio signifies an enhancement in the bank’s loan recovery processes and risk management strategies, which is a positive indicator for the future.
The bank’s deposit base experienced a notable growth of 35% year-on-year, while advances grew by 18%. This strong growth in both deposits and advances highlights the bank’s expanding customer base and increasing lending activities, which are crucial for sustaining its operations and growth in the competitive banking sector.
Dividend Announcement and Record Date
In conjunction with its quarterly results, Equitas SFB announced a final dividend of Rs 1 per share for the financial year 2023-24.
The record date for this dividend has been set for August 9, 2024. Shareholders who are listed in the records of the Register of Members or Depositories as beneficial owners of shares up until this date will be eligible to receive the dividend.
The dividend declaration is a key aspect of the bank’s shareholder value proposition, providing returns to investors despite the challenging profit performance in the current quarter.
Shareholder approval for this dividend will be sought at the bank’s Annual General Meeting (AGM) scheduled for September 10, 2024.
The AGM will also serve as a platform for discussing other important matters related to the bank’s governance and future strategies.
Market Reaction and Share Performance
Following the announcement of the financial results, the performance of Equitas SFB’s shares on the Bombay Stock Exchange (BSE) exhibited a downward trend.
The shares opened at Rs 89.99 but soon experienced a decline, falling approximately 6% from the previous close, reaching a low of Rs 83.55 during the trading session.
By the end of the trading day, the stock closed at Rs 86.90, reflecting a decrease of 2% from the previous day’s closing price.
This decline in share price can be attributed to investor concerns over the substantial drop in net profit and its potential implications for the bank’s future earnings and financial health. Despite the growth in interest income and deposits, the significant profit decline has likely overshadowed these positive aspects in the short term.
Final Remarks
Equitas Small Finance Bank’s Q1 results for the fiscal year 2024 present a mixed picture. While the bank has shown impressive growth in interest income, total income, and asset quality improvements, the substantial drop in net profit and the increase in operating expenses are points of concern.
The strong growth in deposits and advances, coupled with a stable NPA ratio, provides some reassurance about the bank’s operational stability and growth prospects.
The announcement of a dividend and the upcoming AGM are important for maintaining investor confidence and providing clarity on the bank’s future direction.
However, the recent dip in the share price highlights the market’s cautious outlook given the current profit performance challenges.
Moving forward, stakeholders will be keenly watching how Equitas SFB addresses these challenges and capitalizes on its growth opportunities to enhance profitability and shareholder value.
