EQUITAS SMALL FINANCE BANK 2023-24 Annual Report Analysis

Fri, 16 Aug

EQUITAS SMALL FINANCE BANK has announced its results for the year ended March 2024. Let us have a look at the detailed performance review of the bank during the year 2023-24.

EQUITAS SMALL FINANCE BANK Income Statement Analysis

• Interest income during the year rose 31.8% on a year-on-year (YoY) basis.
• Interest expenses were up by 48.8% YoY during the same period.
• Operating expenses increased by 22.7% YoY during the year.
• The bank's net interest income (NII) increased by 21.0% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a decline and stood at 7.7% in FY24 as against 7.8% in FY23.
• Other income increased by 19.3% YoY during the year.
• Net profit for the year increased by 39.3% YoY.
• Net profit margins during the year increased to 14.6% in FY24 from 13.8% in FY23.

EQUITAS SMALL FINANCE BANK Income Statement – 2023-24

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*	% Change
Interest Income	Rs m	41,619	54,864	31.8%
Other Income	Rs m	6,696	7,987	19.3%
Interest Expense	Rs m	16,172	24,066	48.8%
Net Interest Income	Rs m	25,447	30,798	21.0%
Operating Expense	Rs m	20,383	25,011	22.7%
Pre-provision Operating Profit	Rs m	11,760	13,774	17.1%
Provisions & Contingencies	Rs m	6,024	5,784	-4.0%
Profit before tax	Rs m	7,688	10,631	38.3%
Tax	Rs m	1,952	2,642	35.3%
Profit after tax	Rs m	5,736	7,990	39.3%
Minority Interest	Rs m	0	0	0.0%
Net Interest Margin	%	7.8	7.7
Net profit margin	%	13.8	14.6

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EQUITAS SMALL FINANCE BANK Balance Sheet Analysis

• The bank's deposits during FY24 stood at Rs 361.3 bn as compared to Rs 253.5 bn in FY23, thereby witnessing an increase of 42.5%.
• Advances for the year stood at Rs 309.6 bn as compared to Rs 258.0 bn during FY23, a rise of 20.0%.
• Cost of deposits for EQUITAS SMALL FINANCE BANK rose 10.8% and stood at 5.9%, while yield on advances rose to 15.9%.
• The lender's investments rose to Rs 90.7 bn during the year from Rs 66.6 bn in FY23.
• Borrowing stood at Rs 17.9 bn, a fall of 39.9% as compared to previous year.
• Overall, the total assets and liabilities for FY24 stood at Rs 453.0 bn as against Rs 349.6 bn during FY23, thereby witnessing a rise of 29.6%.

EQUITAS SMALL FINANCE BANK Balance Sheet – as on March 2024

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*	% Change
Networth	Rs m	51,523	59,279	15.1%
Advances	Rs m	257,986	309,643	20.0%
Deposits	Rs m	253,485	361,292	42.5%
Yield on advances	%	14.6	15.9
Cost of Deposits	%	5.4	5.9
Investments	Rs m	66,646	90,653	36.0%
Borrowings	Rs m	29,738	17,875	-39.9%
Total Assets	Rs m	349,581	453,039	29.6%

Current Valuations for EQUITAS SMALL FINANCE BANK

• The trailing twelve-month earnings per share (EPS) of the bank stands at Rs 7.0, an improvement from the EPS of Rs 5.2 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 79.9, stands at 12.9 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 1.5 times, while the price to income ratio stands at 1.9 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*
Income per share (Unadj.)	Rs	37.5	48.3
Earnings per share (Unadj.)	Rs	5.2	7.0
Diluted earnings per share	Rs	5.0	7.0
Avg P/E ratio	Rs	11.2	12.9
Avg P/ABV ratio	Rs	1.9	1.5
Avg Market Cap	Rs	64,063	102,934
Dividends per share (Unadj.)	Rs	1.00	1.00

Ratio Analysis for EQUITAS SMALL FINANCE BANK

• Efficiency Ratios

  Credit/Deposit Ratio: The bank's credit/deposit ratio deteriorated and stood at 85.7x during FY24, from 101.8x during FY23. The credit/deposit ratio tells us how much money a bank has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The bank's debt to equity ratio increased and stood at 6.40x during FY24, from 5.50x during FY23. The debt to equity ratio of a bank tells us how much debt a bank uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): EQUITAS SMALL FINANCE BANK's capital adequacy ratio (CAR) was at 21.7% as on 31 March 2024 as compared to 23.8% a year ago. This ratio helps measure the financial strength of the bank or any finance company to meet their obligations using their assets and capital.

  A bank that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the bank's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a bank sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the bank is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the bank improved and stood at 13.5% during FY24, from 11.1% during FY23. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the bank improved and stood at 1.76% during FY24, from 1.64% during FY23. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the bank improved and stood at 16.66% during FY24, from 13.71% during FY23. The ROCE measures the ability of a bank to generate profits from its total capital (shareholder capital plus debt capital) employed in the bank.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a bank's gross NPAs to gross advances. EQUITAS SMALL FINANCE BANK's gross NPA ratio stood at 2.6% as of 31 March 2024 compared to 2.8% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a bank's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the bank has made provisions.

  The net NPA ratio of EQUITAS SMALL FINANCE BANK was 1.2% in financial year 2024. This compared with 1.2% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*
Credit/Deposit Ratio	x	101.8	85.7
Debt to Equity Ratio	x	5.5	6.4
Loans / Deposits	x	0.1	0.0
Capital Adequacy Ratio	%	23.8	21.7
Return on Equity	%	11.1	13.5
Return on Assets	%	1.6	1.8
Return on Capital Employed	%	13.7	16.7
% of Gross NPAs	%	2.8	2.6
% of Net NPAs	%	1.2	1.2
Yield on Advances	x	14.6	15.9
Yield on Investments	x	5.1	7.1

To see how EQUITAS SMALL FINANCE BANK has performed over the last 5 years, please visit here.

EQUITAS SMALL FINANCE BANK Share Price Performance

Over the last one year, EQUITAS SMALL FINANCE BANK share price has moved down from Rs 85.1 to Rs 79.9, registering a loss of Rs 5.3 or around 6.2%.

Meanwhile, the S&P BSE BANKEX is trading at 57,156.0 (up 0.8%). Over the last one year it has moved up from 49,329.9 to 57,156.0, registering a gain of 7,826.2 points (up 15.9%).

Overall, the S&P BSE SENSEX is up 21.9% over the year.

(To know more, you can check out historical annual results for EQUITAS SMALL FINANCE BANK here and quarterly results for EQUITAS SMALL FINANCE BANK here)