Synopsis: Ujjivan Small Finance Bank (SFB) has sold a stressed loan portfolio valued at Rs. 364.51 crore to an Asset Reconstruction Company (ARC) for Rs. 34.26 crore, aiming to enhance its balance sheet by reducing non-performing assets. As of December 2024, the bank's gross loan book reached Rs. 30,466 crore, marking a 9.8% year-on-year growth.
Ujjivan Small Finance Bank (SFB) has strategically divested a stressed loan portfolio with an outstanding value of Rs. 364.51 crore as of January 31, 2025, to an Asset Reconstruction Company (ARC) for a consideration of Rs. 34.26 crore.
This transaction, finalized on February 28, 2025, received approval from the bank's authorized board committee on February 21, 2025.
This move aligns with Ujjivan SFB's ongoing efforts to strengthen its balance sheet by offloading non-performing assets (NPAs).
In the third quarter of the fiscal year 2024-25 (Q3 FY25), the bank reported a slight increase in gross NPAs, rising to 2.68% from 2.52% in the previous quarter.
However, net NPAs remained stable at 0.56%, reflecting effective management of asset quality.
The bank's gross loan book stood at Rs. 30,466 crore as of December 31, 2024, representing a 9.8% year-on-year growth and a 0.4% increase from the previous quarter.
Notably, the secured loan segment experienced significant expansion, accounting for 39.3% of the total loan portfolio, up from 28.3% a year earlier and 34.9% in the preceding quarter.
This shift underscores the bank's strategic focus on enhancing the quality and security of its lending practices.
Despite these positive developments, Ujjivan SFB reported a net profit of Rs. 109 crore for Q3 FY25, marking a 64% decline from the Rs. 304 crore profit recorded in the same period the previous year.
This decrease is attributed to various factors, including a contraction in net interest margin (NIM), reduced other income, and higher credit costs.
The bank's total income for the quarter increased to Rs. 1,763 crore from Rs. 1,655 crore in the corresponding period last year, with interest income rising to Rs. 1,591 crore from Rs. 1,471 crore.
Conclusion:
Ujjivan Small Finance Bank's recent sale of its stressed loan portfolio reflects a proactive approach to managing asset quality and fortifying its financial position.
The bank's emphasis on growing its secured loan segment indicates a strategic pivot towards more stable and secure lending practices.
However, the significant drop in net profit for Q3 FY25 highlights challenges that the bank needs to address to ensure sustainable profitability.
As Ujjivan SFB continues to navigate the evolving financial landscape, its focus on asset quality and strategic growth will be pivotal in maintaining investor confidence and achieving long-term success.
Disclaimer: The information presented in this article is based on publicly available sources and the bank's official disclosures as of February 28, 2025. Financial figures and statements are subject to change based on future developments and regulatory filings. Readers are advised to consult official financial reports and statements for the most accurate and up-to-date information.
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