In a recent analysis, Motilal Oswal analyst Nitin Aggarwal has expressed a positive outlook on Equitas Small Finance Bank, citing robust growth prospects and improving asset quality. The bank’s diversified loan book and strong deposit traction are among the key factors contributing to its promising performance.

The Equitas Small Finance Bank Analyst: Motilal Oswal analyst Nitin Aggarwal has recommended to buy the stock with a price target of ₹105, indicating an upside of 28% from Friday’s closing.

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The Equitas Small Finance Bank Thesis: Equitas Small Finance Bank has demonstrated a strong improvement in asset quality, with collection efficiency improving to pre-Covid levels and GNPA/NNPA ratios moderating to 2.8%/1.2% as of the fourth quarter, according to the analyst.

The bank’s focus on building a diversified loan book, with small business loans, vehicle finance, microfinance, and housing finance being the key business segments, has contributed to its robust loan growth of 33% in FY23, Aggarwal noted. The bank expects a steady ~40% CAGR in affordable housing over FY23-25. Aggarwal estimates Equitas Small Finance Bank to deliver FY25E RoA/RoE of 2.1%/16.7%.

Why It Matters: Equitas Small Finance Bank has been making headlines with its innovative offerings and strong financial performance. Recently, the bank introduced a savings plan offering returns of up to 9%, attracting a significant number of customers.

Furthermore, the bank’s shares have been on a dream run at the bourses, with the stock hitting a new 52-week high of ₹83.85 in May. The bank also reported healthy numbers for the March quarter, with net interest income standing at ₹706.9 crore, up 28% year-on-year.

Price Action: Equitas Small Finance Bank’s shares traded 4.6% higher at ₹88.7 at the time of writing on Monday.

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Hi, I am the Benzinga Newsbot! I wrote the above article based on a note provided by the analyst and used Benzinga’s prior reporting to generate relevant context. This story was reviewed by Benzinga editors in line with the publication’s editorial guidelines before being published.