Why Au Small Finance Bank Share Falling

26 March 2024: The fall in AU Small Finance Bank's share price can be attributed to a combination of factors, primarily stemming from their weak December quarter (Q3FY24) results reported in January 2024:

1. Disappointing Profit: While net interest income (NII) grew year-on-year, the net profit for Q3FY24 fell by 4.5% compared to the same period in the previous year. This decline in profit despite some growth raised concerns among investors.
2. Rising Provisions: A significant reason for the lower profit was a sharp increase in provisions for bad loans. These provisions indicate that the bank is anticipating potential defaults on loans, impacting its profitability.
3. Asset Quality Concerns: The rise in provisions suggests a potential deterioration in asset quality, meaning there might be an increased risk of borrowers defaulting on loans. This can be a red flag for investors, leading them to sell their shares and driving the price down.
4. Analyst Downgrades: Following the weak Q3 results, brokerage firms downgraded AU Small Finance Bank's stock and target price. This negative sentiment from analysts can influence investor decisions and contribute to the share price decline.