Suryoday Small Finance Bank is targeting a net interest margin of 9-10% in 2022-23, its managing director and chief executive officer Baskar Babu Ramachandran has said.
A net interest margin is a key source of revenue for a bank or a financial institution as it shows the difference between the interest earned and paid out to lenders such as depositors.
The Mumbai-based small financier announced its results on Friday, with its net interest margin rising to 9.2% for the quarter of July-September from 9.1% a year ago. Its net interest income rose 19.5% year-on-year (YoY) to Rs 175.9 crore.
Suryoday Small Finance Bank’s gross advances rose 20.3% YoY to Rs 5,378 crore as on September 30. Going ahead, the small financier is targeting a loan growth of 25-30% YoY and a deposit growth of 30-40% YoY in 2022-23.
To put things in perspective, micro-finance loans constitutes 64.4% of the lender’s total advance book. Secured lending portfolio includes affordable loans for housing, micro business and commercial vehicles.
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In addition to this, the small financier is currently testing its two-wheeler loans and the average ticket size of these is expected to be Rs 50,000-1 lakh.
“We see a large scope in extending pre-approved two-wheeler loans to our existing micro-finance customers in specific geographies,” Ramachandran said.
“We aim to deliver a customer experience where the lady of the household wants to buy a two-wheeler loan need not go to a two-wheeler dealership and give documents. It is a pre-approved loan,” he said. The small financier will also pilot its small ticket secured business loans in January-March. This will essentially be a property loan with an average ticket size of Rs 3-10 lakh.
Broadly, the bank wants to increase its secured loans to 50-55% of the overall portfolio by 2024-25.
Ramachandran expects mortgages, secured business loans, small ticket mortgages, home loans and commercial vehicle loans to constitute 90% of its secured loans.
The small financier total deposits rose 34.5% YoY to 4,207 crore rupees as on September 30. Akin to its peer small financiers, Suryoday Small Finance Bank’s deposit growth has surpassed its loan growth. Specifically, retail deposits stood at 72% of total deposits.
“The ideal composition of retail deposits should be 80% but we are okay with 70%. Deposit mobilisation is a little more challenging in the current environment. Most of our wholesale deposits are non-callable in nature,” Ramachandran said.
The small financier is also banking on its partnership with Fino Payments Bank to build its fixed deposit base. Ramachandran expects as much 10% of the small financier’s overall deposits to be mobilised through this partnership.