SFBS suffer net loss in Q1 as provisions surge
The four listed small finance banks (SFBS) — AU, Ujjivan, Equitas, and Suryoday — reported a combined net loss of ~66 crore in the June quarter of financial year 2021-22 (Q1FY22) because of a sharp rise in provisions amid the second wave of the pandemic.
In comparison, the SFBS had reported a profit of ~340 crore in Q1FY21 and ~375 crore in Q4FY21. Of the four, Ujjivan and Suryoday booked losses of ~233 crore and ~48 crore, respectively, in Q1. Reflecting the impact of Covid on asset quality, the provisions — including those for bad and restructured loans — rose nearly twofold to ~912 crore in Q1 from ~444 crore the previous year. The SFBS had made provisions of ~302 crore in Q4.
Gross non-performing assets (NPAS) of the SFBS — which predominantly lent to households, individuals, and small businesses — rose from ~1,103 crore in Q1FY21 to ~4,068 crore in Q1FY22. Sequentially, bad loans were up from ~3,610 crore in Q4.
Recoveries were hampered as many borrowers lost their livelihood and those who had money preferred to hold on to it to tide over the pandemic. This resulted in a rise in slippage. Net NPAS rose from ~439 crore in June 2020 to ~1,683 crore in June 2021. Sequentially, there was very little addition over ~1,634 crore in March 2021 as SFBS hiked provisions. The limited increase shows in coverage ratio for bad loans on the books. Bankers said Covid-19’s impact was more pronounced on the retail and small business segments. Loan disbursals were hit by lockdowns in Q1, which also impacted interest income and loan book expansion. Net interest income grew by 12 per cent to ~1,693 crore in Q1 from ~1,512 crore last year, and from ~1,530 crore in Q4. Advances grew by 17 per cent YOY to ~69,835 crore in June 2021. However, they shrank sequentially from ~71,860 crore in March 2021.
Extending small loans is contact intensive, which was disturbed during the second wave. With the easing of curbs, credit offtake saw gradual uptick in July 2021. The SFBS’ deposits rose by 36.3 per cent YOY to ~69,444 crore in Q1. Sequentially, they grew 3.5 per cent from ~67,115 crore in Q4.