AU Small Finance Bank obtains AA/Stable rating for Crisil’s long-term debt instruments

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NEW DELHI: Rating agency Crisil Thursday revised its outlook on long-term debt instruments (Tier II bonds, non-convertible debentures and subordinated debt bonds) of AU Small Finance Bank to AA/Stable.

Previously, Tier II bonds had a CRISIL AA-/Positive rating which was upgraded to CRISIL AA/Stable, the lender said in a statement. In addition, the bank’s fixed deposit program rating was upgraded from CRISIL FAA+/Positive to AA/Stable.

“The ratings upgrade is a testament to the bank’s continued overall performance and demonstrated ability to improve its asset quality and earnings profile,” AU Small Finance Bank said in the statement.

“CRISIL’s ratings upgrade is the result of AU Bank’s team’s hard work to ensure a surge in deposit-freedom, strong asset quality in the post-COVID scenario and an eye-catching approach. hawk on asset quality. We also maintained adequate capitalization and healthy profitability metrics despite the challenges. Going forward, we will continue to invest in our digital capabilities and launch new products to ensure the delivery of quality services to our customers,” said Sanjay Agarwal, Managing Director and CEO of AU Small Finance Bank.

The bank said key strengths driving the ratings include adequate capitalization with a capital adequacy ratio consistently above 15%; a sustained improvement in its deposit franchise with a three-year CAGR of 39.4%; the bank’s ability to sustain the improvement in its retail deposit franchise; and a demonstrated track record of maintaining above average asset quality through a strong focus on portfolio monitoring and collection practices and a deep understanding of operating geography and borrower profile .

Adequate profitability over the past three to four years due to high yields with reduced cost of additional funding and strong liquidity with an average Liquidity Coverage Ratio (LCR) of 125% against the regulatory requirement of 100 % are the other factors that influenced the ratings.

CARE Rating also recently raised the rating of the bank’s long-term debt instruments (Tier II bonds) to CARE AA/Stable, which was previously CARE AA-/Stable. In addition, the agency also reaffirmed the rating of the bank’s short-term instruments (certificate of deposits) at A1+.

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