Ujjivan Small Finance Bank Q1 Results: Stock recovers 13% from lows after raising FY27 RoA guidance

Shares of Ujjivan Small Finance Bank Ltd. saw a sharp recovery from the lows of the day on Thursday, July 23, in response to the management raising its full year forecast for its Return on Assets (RoA).

The small finance bank now expects its financial year 2027 RoA to be between 1.8% to 2%, compared to 1.6% earlier. The bank's management expects continued growth led by secured lending, stable margins, disciplined operating expenses and controlled credit costs.



Ujjivan Small Finance Bank also reported a strong set of earnings in the first quarter, supported by strong loan and deposit growth, stable margins, lower credit coats and record earnings. Only reported a seasonal slowdown in disbursements acted as a minor drag.

Net profit for the quarter surged to 316.5 crore in the June quarter from ₹103.2 crore last year.

Its net interest income increased by 39% to ₹1,187 crore from ₹856 crore in the year-ago period. Its cost-to-income ratio was at 62% in the first quarter compared to 63% in the previous one and 67% last year.

Asset quality also improved for Ujjivan Small Finance Bank on a sequential basis. Gross non-performing assets (NPAs) improved to 2.16% from 2.26% sequentially, while net NPA improved to 0.34% from 0.43% in the previous quarter.

The company's capital adequacy ratio (CAR) increased to 20.36% in the first quarter from 21.14% in the previous one and 22.77% in the previous year.

The CRAR moderated by 78 basis points sequentially and 241 basis points from last year, primarily due to strong loan growth consuming capital.

Its slippage ratio improved to 1.6% from 1.8% sequentially and from 4.3% last year.

Business growth

The lender's gross loan book grew 29% from last year 5.5% from the previous quarter to ₹42,903 crore, remaining on track to meet the FY27 guidance.

Its disbursements rose 41% from last year but declined 6% sequentially due to seasonal factors.

Its secured loan book crossed 50% of the portfolio, growing 43% from the previous fiscal and 8% from the last quarter, reflecting continued portfolio diversification.

Deposits and CASA

The lender's total deposits increased 24.6% to ₹48,129 crore, the highest annual deposit growth in the last 10 quarters.

Its CASA deposits surged 37.8% to ₹12,930 crore, significantly outpacing overall deposit growth.

Its retail deposits rose to ₹32,716 crore, while the bank continued to improve its retail funding mix.

Ujjivan SFB's cost of funds improved annually to 6.9% but edged bu 10 basis points sequentially from 6.8%, reflecting higher funding costs.

Margins and efficiency

The lender's net interest margin (NIM) remained stable at 8.5% sequentially, despite the slight rise in funding costs.

Its cost-to-income ratio improved to 62% from 63% last quarter and 57% last year, supported by disciplined cost control.

Its operating expenses/average assets declined to 6.1%, indicating improving operating efficiency.

Asset quality

Apart from its non-perfomring assets and slippage ratio improving, the lender's credit cost moderated to 0.9% of overage total assets.

Its collection efficiency remained robust at 98.4%, while X-bucket collection efficiency stood at 99.68%.

Stock reaction

Shares of Ujjivan Small Finance Bank are holding on to gains of 7.5% after the result announcement and the guidance raise at ₹70 apiece. The stock is now up 31% so far this year.