The lender's profitability was driven by a nearly fourfold jump in pre-provision operating profit to Rs 362 crore as total income reached Rs 1,388 crore. Concurrently, net interest margin widened to 8.2% from 5.9% recorded in the prior-year period. Bad loans declined drastically, allowing the bank to scale back provisions to Rs 148 crore while elevating its provision coverage ratio to 94%.
Key points
Expanding net interest margins and income growth drove a substantial surge in core operat…: Expanding net interest margins and income growth drove a substantial surge in core operational profitability.
Significant declines in bad loans enabled the bank to cut provisions while strengthening…: Significant declines in bad loans enabled the bank to cut provisions while strengthening its coverage buffer to 94%.
Business volumes expanded robustly as gross advances climbed 25% with an increasing propo…: Business volumes expanded robustly as gross advances climbed 25% with an increasing proportion of secured loans.
Sources checked by our analysis pipeline: 1
The bank returned to profitability in the third quarter of the last fiscal year after incurring losses for the previous five quarters due to high credit costs stemming from asset quality stress in the microfinance sector.
Its net interest margin for the quarter improved to 8.2% from 5.9% seen for the year-ago period.
ESAF's pre-provision operating profit for the quarter under review rose nearly four times to Rs 362 crore from Rs 93 crore in the corresponding period last year. Total income rose to Rs 1388 crore from Rs 965 crore.
Its asset quality improved with the gross non-performing assets ratio falling to 2.84% at the end of September from 5.40% three months back and 8.54% a year prior. Net NPA stood at 0.34% against 0.83% and 3.83% respectively over the same period.
The bank made Rs 148 crore in provisions for the second quarter, significantly lower than the Rs 249 crore in the year-ago period, which aligns with the better asset quality. Provision coverage ratio, however, improved to 94% at the end of the reporting period from 74.4% a…
The Supreme Court dismissed appeals from the Reserve Bank of India, the central government, and the lender regarding the nullified write-off of ₹8,415 crore in Additional Tier-1 bonds. This legal defeat threatens to compress the bank's Common Equity Tier 1 capital ratio by roughly 250 basis points. Consequently, market confidence has eroded as the institution prepares a review petition while facing investor friction over pending coupon obligations.
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