AU Small Finance Bank‘s net profit for the June quarter (Q1FY23) rose 32% year-on-year to Rs 268 crore on higher net interest income.

The Jaipur-based lender posted a net profit of Rs 203 crore in the same period last year (Q1 FY22). Subsequently, its net profit fell 23% from Rs 346 crore in the fourth quarter of fiscal 2022.

Shares of the bank closed 1.92% higher at Rs 576.75 per share on the BSE on Wednesday.

The lender’s net interest income (NII) grew by 35% in Q1FY23 to Rs 976 crore from Rs 924 crore in Q1FY22. Subsequently, NII rose 4% from Rs 937 crore. However, according to analysts, its net interest margin (NIM) fell to 5.9% in Q1FY23 from 6% a year ago and 6.3% in Q4FY22.

Its return on assets fell to 13.3% in Q1FY23 from 14% a year ago, and its cost of capital fell to 5.7% from 6.3% in Q1FY22. We will try to bring the cost of funding in FY23 roughly in line with FY22 as money (current and savings accounts), and retail deposits are reduced.

Its trading portfolio was under pressure as yields rose, trading at a loss of Rs 55 crore. Other revenue fell 26% year-on-year to Rs 159 crore from Rs 215 crore in Q1FY22 and 49% from Rs 311 crore in Q4FY22.

The bank’s asset quality profile has improved, with gross non-performing assets (GNPA) falling to 1.96% in June 2022 from 4.31% a year ago. Net NPAs fell to 0.56% in the quarter from 2.26% a year ago.

The provision coverage ratio rose to 72% in the quarter from 49% a year ago. Assets under management at the bank rose 37% year-on-year to Rs 50,161 crore as of June 2022.

Its deposits rose 48% year-on-year to Rs 54,631 crore in June 2022. The bank’s capital adequacy ratio (CAR) stood at 19.4% in June 2022, down from 23.1% in June 2021.