ESAF Small Finance Bank posts Rs 160 crore Q2 profit as asset quality improves

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 year prior.

Gross advances grew 25% year-on-year to Rs 23,934 crore at the end of September, with the share of the secured portfolio rising to 64% from 61%. Deposits stood at Rs 28466 crore, registering a 24% rise.