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what’s up with AU bank?

what’s up with AU bank?

executive exits have hammered its stock, but is there cause for real concern?
finance
July 4, 2021
3 min read
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what’s up with AU bank?

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what’s up with AU bank?

it is no longer content being called a small finance bank and is aiming for a universal banking licence. but things aren’t very smooth at AU Small Finance Bank.

it saw some recent senior level exits, with a report claiming some executives quit simply because they didn’t want to work at its head office in Jaipur. its stock took a beating, slipping 16% in just five days.

so, what is the matter?

the bank released a statement about these exits in August. this got investors spooked. the stock started tanking immediately.

three back-to-back exits of senior executives also raised concerns among its investors. its chief risk officer Alok Gupta recently resigned and was replaced. now its chief audit officer wants to leave too, but the bank is trying to retain him.

in a conference call on September 1, the bank management tried to assuage concerns. CEO Sanjay Agarwal said that the exits were just a coincidence. however, investors aren’t fully convinced because of the delay in disclosure of the exits.

currently, the bank is also trying to expand its offices in Mumbai and Delhi so that key staff could work from there.

is it time for caution?

AU is the country’s largest small finance bank. the attrition issue appears to be just a short-term blip. in fact, the company has informed the exchanges that it has made ~100 hires at senior positions in the last 12-18 months.

the Q1 numbers were good too and its asset quality stayed stable. brokerages also remain positive for now.
the bank’s gross non-performing assets (NPAs) reduced sequentially from ₹1,503 crore to ₹1,496 crore. it also posted a 15% year-on-year rise in its Q1 net profit at ₹203 crore. 

yes, the second wave of the pandemic did impact loan disbursals. but compared to last year, it was up 75%, showing a clear recovery. there are positive signs when it comes to the numbers but are investors are spooked by the exits.