Equitas Small Finance Bank has outperformed other Small finance banks (SFBs) like Ujjivan and Au SFB showed Q1 business update.
Deposit growth momentum has been strong for Equitas as compared to Ujjivan SFB and Au SFB and Equitas SFB CASA ratio is the highest at 40% versus 26% for Au SFB and 20% for Ujjivan SFB.
While all the three SFBs have shown decline in loan growth and disbursements, for Equitas loan book declined by 0.5% QoQ vs decline of 3% QoQ for Au SFB and vs decline of 7% QoQ for Ujjivan SFB. Equitas also reported improvement in collection efficiency parameters.
“Collection efficiency in small business loans has improved sharply in June as west and north has opened, Vehicle finance has come up well in June and hope that collection efficiency trends will continue to improve going forward” said PN Vasudevan, MD and CEO, Equitas Small Finance Bank in an exclusive interview with ET NOW.
Vasudevan said, customers have started paying back slowly and the underlying business has shown resilience. Commercial Vehicle (CV) business can see uptick from 2H of the year and small business loans have always been strong. However, Microfinance business (MFI) will take some time to come back as this is the segment at the bottom of the pyramid.
Vasudevan expects MFI to come back probably in Q2 but other businesses may come back sooner. However, overall improvement in the business is contingent on the occurrence and spread of any potential third wave. He said, “If there is no third wave then expect a very strong Q2 this year”.
Disbursements have slowed for most of the BFSI players including Equitas SFB. Vasudevan said, there is no issue on the demand front, demand has always remained high in this segment of the market (where we operate), but there were challenges due to the second wave and one had to be cautious too.
Deposit growth has been strong for the bank and the momentum is likely to continue given the focus on building the liability franchise and new products on the savings front (HNI Elite, 7% savings rate for a particular savings account bucket etc).
Recently investors have started focusing a lot on ESG businesses both globally and in India. Vasudevan believes while ESG is important in the current scenario vaccination should also be given more focus.
While quite a lot of corporates have participated in covid-19 relief efforts and vaccination efforts, he believes investors should ask corporates more on pitching in efforts towards vaccination as well.
