Fedbank Financial Services conducted a conference call on 19 July 2024 to discuss the financial results for the quarter ended June 2024. Anil Kothuri, MD & CEO, Fedbank Financial Services of the company addressed the call:

Highlights:

The company caters to small enterprises providing easy access to loans in the gold loans and mortgage loans.

The company has recorded strong 8% or 996 crore growth in AUM during Q1FY2020. The AUM has surged 40% yoy to Rs 13188 crore end June 2024.

The AUM growth was driven by the gold loan book rising 15% qoq and 46% yoy to Rs 4532 crore, supported by increase in gold prices. The gold tonnage has increased by 23% yoy end June 2024. Gold loan book has increased by Rs 590 crore in Q1FY2025.

The company is progressing well on its off book strategy which has witnessed an increase in share to 20.7% from 18.7% last year.

The RoA stood at 2.4% and RoE at 12.3% for Q1FY2025.

The bank has witnessed GNPA increase by 30 bps for Q1FY2025 in line with the 30 bps increase in the Q1 of last year. The company expects to improve asset quality ahead.

Since the RBI mandated gold loan disbursements above Rs 20000 in electronic form, the company immediately complied with the regulation.

The per branch AUM of the company has crossed Rs 10 crore end June 2025.

The company has posted 15% qoq and 69% yoy surge in disbursements above Rs 5004 crore in Q1FY2025.

The gold loan disbursements have surged 39% qoq and 73% yoy to Rs 3970 crore and the mortgage loan disbursements also jumped 74% yoy to Rs 736 crore in Q1FY2025. The business loan disbursements have galloped 31%.

The mortgage loan book has moved up 40% yoy and 6% on sequential basis end June 2025.

The bank expects to scale up branch infrastructure over the next two quarters to support the loan growth. However, this may have an impact on the cost income ratio of 100-150 bps. The company is planning to add 50 gold loan branches and 30 mortgage branches

The gross NPA stood at1.97% and the net NPA at 1.6%. The low LTV ratio on the mortgage loans gives comfort on collections.

The cost of borrowings of the company increased marginally to 8.78% in Q1FY2025 from 8.75% in Q4FY2024. An incremental cost of the borrowing stands at 8.63%.

About 89% of the borrowings of the company are on a floating rate basis. About 30% of the borrowings are on external benchmark based lending rate, while 50% of the incremental borrowings is on external benchmark based lending rate.

The company continues to maintain the guidance of credit cost at 0.8% for FY2025.

The company is targeting RoA of 2.7-2.75% and RoE of above 14% for FY2025.

The cost to income ratio is expected to improve to 56% by end Q4FY2025 from 57.4% in Q4FY2024.