AU Small Finance Bank Case Study: Services, Performance, Financials, and SWOT Analysis.
AU Small Finance Bank is a commercial bank that provides financial services to lower- and middle-income groups and micro and small businesses with limited or no access to standard banking and finance channels.
In today’s blog, we will explore the company’s financials, business model, competitors, and SWOT analysis.
Overview
AU Small Finance Bank is one of our country’s largest Small Finance Banks. The firm was founded by Mr. Sanjay Agarwal in 1996 as the AU financier in Jaipur, Rajasthan. It is approved by the Reserve Bank of India (RBI) under Section 22 (1) of the Banking Regulation Act, 1949, to operate the business as a Small Finance Bank in India.
Recognized as one of India’s best Small Finance Banks, AU SFB offers almost all banking products & services, including High-Interest Rate Savings Accounts, Fixed Deposits, Debit Cards, Credit Cards, Retail Loans, Insurance, and Investments.
In 2021, the Bank changed its tagline from ‘Chalo Aage Badhein’ to ‘Badlaav Humse Hai’. The new tagline, the Bank’s first amalgamated brand campaign, resonates perfectly with its spirit of challenging the status quo. Let’s dive into some essential data of the firm.
| Market Cap | ₹ 38,131 Cr. |
| TTM P/E | 24 |
| Current Price | ₹ 570 |
| Book Value | ₹ 164 |
| ROE | 15.52 % |
| 52 Week High / Low | ₹ 813 / 548 |
| Dividend Yield | 0.18 % |
| Face Value | ₹ 10.0 |
Services
AU Small Finance Bank covers various sectors in its business model.
Personal Banking
Branch Banking
- Savings Account
- Term Deposit
- Bank Locker
- Life & Health Insurance
- General & Fire Insurance
- Mutual Fund
- 3 in 1 Trading Account
Loan and Advances
- Vehicle Loan
- Home Loan
- Personal Loan
- Gold Loan
- Credit Card
Commercial Banking
Transaction Banking
- Current Account
- Trade & Forex
- Overdraft Facilities
- Cash Management Services (CMS)
- Non-Fund Based Facilities
Loan and Advances
- Secured Business Loan (SBL)
- Agri Banking
- NBFC Lending
- Real Estate and Construction Finance
Digital Banking
- Savings Account
- Fixed Deposit
- Vehicle Loan
- Personal Loan
- Credit Card
- Insurance & Investments
Digital Channels
- Mobile Banking
- Netbanking
- Corporate Internet Banking
- Video Banking
- WhatsApp Banking
- Chatbot
- Missed Call Banking
- AU Biz Pay
Payments & Services
- Merchant Payment (UPI QR & Point of Sale – POS)
- Debit Card
- AEPS
- BHIM UPI
- Bharat Bill Payment Service (BBPS)
- NETC | FASTag
- NACH/e-NACH
- Tax Payment
Competitors
- Muthoot Microfin
- Kinara Capital
- Bajaj Finserv
- Equitas
- Manappuram Finance
Awards and Recognitions
- 2023 – Most Impactful Women Employment Initiative of the Year
- 2023 – Best Customer-Centric Culture in Bank
- 2022 – First runner-up at the Front Benchers Award
- 2024 – Financial Inclusion Award
- 2024 – Best Small Finance Bank at the Mint
Financial Highlights
Income Statement
| Particulars | Mar-23 | Mar-22 | Mar-21 | Mar-20 |
| Interest Earned | 8,205.41 | 5,921.73 | 4,950.05 | 4,285.88 |
| Other Income | 1,034.46 | 993.69 | 1,420.93 | 706.09 |
| Total Income | 9,239.87 | 6,915.43 | 6,370.98 | 4,991.98 |
| Profit Before Tax | 1,864.65 | 1,454.07 | 1,458.50 | 913.97 |
| Consolidated Profit | 1,427.93 | 1,129.83 | 1,170.68 | 674.78 |
The Income Statement reflects a massive uptrend in total income over the last 4 years. This uptrend was primarily supported by Interest Earned. The consolidated profit reflects a relatively lower increase over the course of the last 3 years. This indicates an increased proportion of revenue being diverted to expenditure.
Cash Flow Statement
| Particulars | Mar-23 | Mar-22 | Mar-21 | Mar-20 |
| Cash From Operating Activities | 5,493.64 | 6,848.98 | 5,056.10 | 659.57 |
| Cash Flow from Investing Activities | -4,319.50 | -4,753.37 | -989.74 | -1,267.45 |
| Cash from Financing Activities | 2,322.52 | -948.44 | -2,654.70 | 2,237.36 |
| Net Cash Inflow / Outflow | 3,496.66 | 1,147.18 | 1,411.66 | 1,629.49 |
The figures in the Cash Flow Statement do not align with the trend in the Income Statement, as major turbulence can be seen in both Operating and Financing Activities. The investing activities show an increase in investment every year. Some might consider this to be a motivator for growth in the long term.
KPIs
| Particulars | Mar-23 | Mar-22 | Mar-21 | Mar-20 |
| Net Interest Margin (NIM) | 4.9 | 4.68 | 4.58 | 4.52 |
| ROE (%) | 13 | 15.03 | 18.65 | 15.41 |
| CASA (%) | 38.43 | 37.28 | 23 | 14.47 |
| Return on Assets (%) | 1.58 | 1.63 | 2.26 | 1.6 |
The KPIs indicate a consistent NIM level but a decreasing ROE level. The environment of the recent surge in interest rates did not materially affect the company’s NIM.
The CASA ratio is comfortably above the threshold figures decided by the RBI. This is a positive point in the company’s growth as it allows it to access cheap capital, further widening the NIM.
Shareholding Pattern
| Shareholder Type | Dec-23 | Sep-23 | Jun-23 | Mar-23 | Dec-22 |
| Indian Promoter | 25.46 | 25.49 | 25.53 | 25.54 | 25.55 |
| DIIs | 20.80 | 19.57 | 19.26 | 20.63 | 20.64 |
| FIIs | 41.13 | 41.64 | 41.61 | 39.74 | 39.61 |
| Others | 12.61 | 13.30 | 13.60 | 14.09 | 14.20 |
The shareholding pattern has remained broadly consistent over the period. This indicates the larger institutions’ trust in the company.
SWOT Analysis
Strengths
- AU Small Finance Bank has a skilled workforce due to its excellent training and learning programs.
- It has a broader geographical presence and associates network that helps deliver proper services to the customers and helps manage competitive challenges in the Consumer Financial Services industry.
- The firm has a successful product mix, which helps it cater to various customer segments in the financial services industry.
Weaknesses
- AU Small finance bank operates in an industry experiencing massive competition from players like Ujjivan Small Finance Bank, Utkarsh Small Finance Bank, etc. Such competition affects bottom line figures of all players in the industry.
- Rising interest rates can negatively impact the firm and its profitability.
- The company has witnessed a downtrend in ROE. This indicates the company’s inability to manage expenses well.
Opportunities
- AU Bank operates in under-penetrated sections such as MSME, vehicle finance, and small enterprise finances, offering strong growth potential.
- Small finance banks need to penetrate the tier 3 markets deeper, which remains untapped.
- Collaborating with local players can also provide more opportunities for growth for the bank.
Threats
- Retention of Key Management Personnel can be difficult as multiple new banks, fintech companies, and existing banks compete for the same talent pool.
- New technologies can increase the competition in the market.
Conclusion
AU Small Finance Bank is one of the leading small finance banks offering a wide range of banking products and services to serve individuals and businesses. The bank has shown strong financial performance. However, it faces challenges such as rising interest rates and competition in the market.
Frequently Asked Questions (FAQs)
- What is the market cap of AU Small Finance Bank Ltd.?
Ans. As of 18th March 24, AU Small Finance Bank Ltd. has a market capitalization of ₹38,131 Cr.
- Who is the founder of AU Small Finance Bank?
Ans. The company was founded by Sanjay Agarwal (managing director and CEO of AU Small Finance Bank).
- Is AU SFB Bank a private or government bank?
Ans. AU Small Finance Bank is a private-sector bank regulated by the Reserve Bank of India (RBI).
- Has there been any major changes in the shareholding pattern of AU Small Finance Bank?
Ans. No, AU Small Finance bank did not witness any major changes in the shareholding pattern.
- What is the total asset value of AU Small Finance Bank Ltd.?
Ans. The total asset value of AU Small Finance Bank Ltd. stood at ₹ 95,977 Cr as of 31-Dec-23.
Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.
