Utkarsh Small Finance Bank continues to reduce exposure to JLG loans, retail deposits rise

Utkarsh Small Finance Bank Ltd. reported a mixed update for the September quarter, where its loan book saw a decline, while deposits also saw a mixed picture, compared to the same quarter last year.

The lender's Gross Loan Portfolio declined by 2.3% during the September quarter to ₹18,655 crore, compared to ₹19,101 crore during the same quarter last year. On a sequential basis, the figure was down 3%.

This decline is inclusive of the Inter-Bank Participation Certificates (IBPC) issued by the bank. IBPC's are short-term instruments where one lender sells assets such as loans or credit to another bank temporarily, to manage liquidity and risk. This mechanism helps banks maintain their short-term funding needs.

Utkarsh Small Finance Bank's Joint Liability Group (JLG) loan portfolio saw a decline of 28.4% compared to the same quarter last year to ₹7,613 crore. At the end of the first quarter, the management had highlighted about strategically shifting its focus towards secured lending and bring down its exposure to the JLG loan portfolio due to a rise in non-performing assets, higher provisions and overall stress in the microfinance segment.

The shift in priorities was evident during the September quarter, as the lender's non-JLG loan portfolio increased by 30.3% from last year to ₹11,042 crore.

On the deposit front, total deposits for the lender increased by 10% during the quarter on a year-on-year basis to ₹21,447 crore, led by retail term deposits, which saw a 28.8% increase from the year-ago quarter to ₹12,257 crore. Bulk term deposits, on the other hand, declined by 23.5% on a year-on-year basis to ₹4,712 crore.

CASA Ratio at the end of the quarter increased to 20.9% from 19.6% last year. The CASA + Retail Term Deposits ratio increased to 78% during the September quarter, from 68.4% last year.

Collection efficiency, excluding pre-payments, for the bank's microbanking loan portfolio stood at 98.6% at the end of the quarter, while Liquidity Coverage Ratio stood at 219%.

Utkarsh Small Finance Bank's board had approved a ₹950 crore rights issue last week, and the details of that will be determined when the board meets again on Wednesday, October 8.

Shares of Utkarsh Small Finance Bank ended 2.1% higher on Friday at ₹22.23, still below its IPO price of ₹25.