AU Small Finance Bank (AU SFB) witnessed a sharp 12% drop in its share price on Monday, marking a nine-month low on the BSE in Monday’s intraday trade.

What Happened? This decline followed the bank’s announcement of a 4% year-on-year decrease in net profit for the December quarter (Q3FY24), totalling ₹375 crore, contrasting with a net profit of ₹393 crore in the same quarter last year. The dip in profits is attributed to a significant increase in provisions and contingencies.

The bank’s stock hit its lowest point since April 2023 and has now fallen 23% from its 52-week high of ₹813 on January 8. Trading volumes surged nearly five-fold.

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AU Small Finance Bank Q3 performance: Despite a 15% year-on-year rise in net interest income (NII) to ₹1,325 crore, AU SFB’s net interest margins (NIMs) dropped to 5.5% from 6.2% in Q3FY23. The bank cited a challenging operating environment with higher interest rates and stiff competition for deposits. Gross non-performing assets (GNPAs) also increased to 1.98%, with net NPA rising to 0.68%.

Motilal Oswal Financial Services (MOFSL) described the quarter as mixed, noting healthy fee and deposit growth but deteriorating asset quality and compressed margins. The bank’s card business faced delinquency issues, leading to higher credit costs. MOFSL remains watchful in the near term, anticipating operational improvements post-merger.

Share price: AU Small Finance Bank Ltd. shares were trading 9.83% lower at ₹638.30 on Monday at midday.

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