Ujjivan Small Finance Bank shares slip 8% after bank revises loan growth forecast for FY25

Ujjivan Small Finance Bank expects its loan book to grow by 20% year-on-year by March 31, 2025. This marks a reduction from the earlier projection of 25% loan growth, as indicated during its March 2024 quarter earnings announcement just a month ago. This adjustment was made due to emerging stress observed in certain segments of the bank’s business operations.

Ujjivan Small Finance Bank stock opened at ₹46.85, lower than its previous close of ₹48.36, before slipping to an intraday low of ₹44.70. Though the stock marginally gained during the day, it still ended the session in the red at ₹45.95, a loss of 4.98%, or ₹2.41.

The bank has revised its forecast for Return on Equity (RoE) for FY25 to 20%, down from the previous estimate of 22%, which is about 200 bps lower. Ujjivan Small Finance Bank has also adjusted its credit cost guidance to 1.7%, an increase from the earlier range of 1.4% to 1.5%.

The adjustments in the bank’s projections can be attributed to growing stress in microfinance sectors, particularly in states such as Punjab, Haryana, Gujarat, Uttar Pradesh and Kerala. In response, Ujjivan Small Finance Bank has opted to moderate disbursements (without a blanket ban) and intensify efforts towards collections.

The bank has appointed Sanjeev Nautiyal as MD and CEO starting July 1, 2024.

Ujjivan Small Finance Bank is a subsidiary of Ujjivan Financial Services, which was among the 10 entities granted in-principle approval by the RBI on September 16, 2015, to establish a bank under the ‘Guidelines for Licensing of Small Finance Banks in the private sector.’ As of March 31, 2024, Ujjivan Small Finance Bank operated 752 branches and 596 biometric ATMs across 26 states and UTs in India.