Ujjivan Small Finance Bank's (SFB) share price witnessed a massive drop, falling nearly 6%, following the bank's third-quarter results for FY 2024-2025. The bank's net profit fell ₹103 crore from ₹300 crore in the same period last year, a staggering 64% drop year-on-year. Increased provisions for bad loans were the main reason for this decline, which worried both market experts and investors.
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Financial Performance Overview
Despite the drop in net profit, Ujjivan SFB's total revenue grew marginally to ₹1,763 crore in Q3FY25 from ₹1,655 crore last year. Additionally, the bank's interest income grew, rising to ₹1,591 crore from ₹1,471 crore in Q3FY24. However, the bank's asset quality has deteriorated significantly, as gross non-performing assets (NPAs) now stand at 2.68% of gross loans, up from 2.18% last year. Additionally, net NPAs increased from 0.17% to 0.56%, indicating that the bank's loan portfolio is becoming increasingly problematic.
There was a significant increase in provision for bad loans, rising to ₹223 crore (excluding tax and contingencies) from just ₹63 crore in the same period last year. This increase results from the bank's proactive strategy to deal with any defaults in difficult economic conditions.
Market Reaction and Share Performance
Following the announcement of these poor results, Ujjivan SFB shares fell 6.48%, closing at ₹32.32 on the Bombay Stock Exchange (BSE). The stock has performed quite poorly in the last six months, declining by nearly 25%, and has lost nearly 40% of its value in the last year. On the other hand, the BSE Sensex has been resilient, rising 7.8% year-to-date while falling only 4.4% in the same six-month period.
Strategic Moves Ahead
Ujjivan SFB's board has authorised a plan to become a universal bank in light of these hurdles, and the company will soon submit an application for a Reserve Bank of India (RBI) license. By taking this planned step, it hopes to increase its banking capacity and provide better services to a larger clientele.
The bank is also focusing on structural adjustments in its liability strategy, targeting wealthy clients such as non-residents and corporate salary employees. After obtaining the necessary licenses, these efforts should enhance its product offerings and clientele.
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