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Equitas Small Finance Bank – Credit growth recovery Coupled With Lower Credit Cost Going Forward Likely To Drive ~2% RoA By FY24E: ICICI Securities

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In its more than five year-journey as a ‘small finance bank’, including two Covid-impacted years, Equitas Small Finance Bank Ltd. remained committed to building a scalable, sustainable and stable franchise with focus on granularity and geographic diversification.

While the journey was temporarily disrupted by the pandemic, management’s successful execution of business strategies is reflected in:

  1. share of the secured book increasing to 81% in FY22 (versus 66% in FY18),

  2. current account and savings account ratio at 48% in Q2 FY23,

  3. average return on asset at 1.4% during FY20-FY22 on quarterly basis, and

  4. calibrated lending growth (16% compound annual growth rate during FY21-FY22).

Despite high exposure to the self-employed small-ticket segment, Equitas SFB has been able to contain its peak gross non-performing loan to less than 5% and maintain steady provision coverage of ~50% during the entire Covid phase.

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