In addition, its high level of capital (Tier 1 ratio of 25.1%) and its liquidity position should enable it to exploit potential opportunities.
Gross NPLs fell to 1.8% from 2.8% in Q3, as BAF canceled bad debts to the tune of 1.3% in Q4. In particular, the Stage 3 coverage rate remained stable q / q at 58%. Restructured loans represented 1.1% of loans classified in phase 2, and BAF provided 20% of these loans, more than the regulatory requirement. Net NPLs plus restructured loans represent 1.8% of loans on which the company holds phase 1 and 2 provisions (including recovery provisions of c Rs 8.4 billion) of a similar amount. With this, the quality of the balance sheet has returned to pre-COVID-19 levels and society should be in a better position to overcome short-term uncertainties amid the second pandemic wave.
All activities (ex-auto) are back in growth mode: consolidated asset management increased by 7% qoq (+ 4% year-on-year), all activities returning to growth mode except of its two-wheel fundraising activity. This segment is the most affected by the pandemic given the type of customer segment it caters to and, therefore, management has deliberately decided to grow slowly in this segment. Short-term growth dynamics will likely be affected by pandemic-related restrictions in large states, although new loan origination rates are relatively better than at the same time last year. Management remained confident in the digital transformation initiatives of the businesses which led to the creation of new loans in the second half of fiscal year 22.
Operations remain high, driven by growth: total operations increased by 16% q / q, driven by a sharp 13% q / q increase in personnel costs. Part of the increase in opex can also be attributed to a higher recovery of commissions paid, which is expected to moderate in the future as asset quality stabilizes.
Preferred Name: We are reducing our 22-23 year results by an average of 4% due to lower growth and higher cost of credit assumptions. We appreciate BAF for its robust business model and strong management execution capacity. After a difficult financial year 21, we expect BAF to return to a phase of strong growth from financial year 22nd. BAF’s technology initiatives are underway, which should enable it to lend to its customers in a transparent manner and reduce its customer acquisition costs. In addition, its high level of capital (Tier 1 ratio of 25.1%) and its liquidity position should enable it to exploit potential opportunities.
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