Synopsis:
AU Small Finance Bank stock jumped sharply after receiving “In Principle” approval from the RBI to act as a universal license, enabling the bank to diversify its operations to its customers.
The shares of this leading Small finance bank are in focus after it received a first step approval from the RBI to act as a universal bank. However, it must fulfill all the necessary approval requirements listed by the RBI to get the final approval.
With a market capitalization of Rs 56,293 crore, the shares of AU Small Finance Bank are currently trading at Rs 755 per share, representing a 10.2 percent decline from its 52-week high of Rs 840.95 per share. Over the past five years, the stock has delivered a robust return of 113 percent.
AU Small Finance Bank announced that it has received in-principle approval from the Reserve Bank of India to transition into a Universal Bank, making it the first Small Finance Bank in India to reach this significant milestone.
This approval is a huge leap forward for the bank, enabling it to provide a comprehensive range of retail, business, and digital banking services. It will also help enhance their brand recognition, attract a wider variety of deposits, and potentially reduce their funding costs over time. The RBI’s endorsement is a strong affirmation of AU’s solid business model, high governance standards, and dedication to promoting financial inclusion.
So, what exactly is a Universal Bank?
It’s a full-service bank that can offer a broad array of financial products and services all in one place, think retail and corporate loans, deposits, investments, insurance, and digital banking, catering to all types of customers. This is quite different from Small Finance Banks, which typically have more restricted roles and mainly focus on lending to priority sectors.
Financial Highlights
AU Small Finance reported a revenue of Rs 4,378 crore in Q1 FY26, up by 16 percent from its Q1 FY25 revenue of Rs 3,769 crore. Coming to its profitability, the company reported a net profit growth of 15.5 percent to Rs 581 crore in Q1 FY26 as compared to Rs 503 crore in Q1 FY25.
The stock delivered an ROE and ROCE of 14.19 percent and 8.40 percent respectively, and is currently trading at a high P/E of 25.72x as compared to its industry average of 16.80x.
AU Small Finance Bank Limited, based in Jaipur, operating across 21 states and 4 Union Territories. They offer a wide range of services, including treasury, retail, wholesale, and various banking operations.
Their offerings cover everything from deposits and debit/credit cards to loans for vehicles, personal needs, homes, businesses, and agriculture. They also provide insurance, mutual funds, and government banking services.
Plus, with their digital solutions like internet and mobile banking, as well as merchant payments, they ensure convenience through branches, business correspondents, and ATMs.
Written by Satyajeet Mukherjee
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