AU Small Finance Bank has posted 13% decline in net profit to Rs 279 crore for the fiscal second quarter ended September amid rise in bad loans. In the year-ago quarter, the band had reported a net profit of Rs 322 crore.

The small finance bank, however, said the net profit was up 42% year-on-year after excluding the profit earned from stake sale in Aavas Financiers. There was a gain of Rs 144 crore due to stake sale in Aavas in second quarter of FY21 and overall gain was of Rs 172 crore in first half of that financial year.

Net income rose 15% to Rs 944 crore while net interest income grew 34% to Rs 753 crore

Total income rose to Rs 1,595.65 crore during the September quarter compared to Rs 1,473.45 crore a year ago.

The bank's other income also climbed 64% to Rs 191 crore. However, employee cost too rose 46% to Rs 327 crore during the quarter.

Gross bad loans or non-performing assets (NPAs) grew 3.16% of gross advances by end of September 2021 from 1.54% in the year-ago period. However, it was down from 4.31% by the end of June quarter.

In absolute value, gross NPAs stood at Rs 1,151.45 crore, up from ₹423.17 crore. Net NPAs rose 1.65% (Rs 591.48 crore) from 0.45% ( Rs 122.83 crore). It was 2.26% in the preceding quarter.

However, provisions for bad loans and contingencies for the quarter fell sharply to Rs 3.60 crore from Rs 32.71 crore a year ago. The bank restructured Rs 80 crore (0.2%) worth of advances during the September quarter.

The bank said it is continuing to build its technology team and over 100 resources are being hired in development and support roles.

“Q2FY22 was a remarkable quarter across most parameters with significant improvement visible in the operating environment, borrower connect and cashflows, and overall confidence in the system," said AU Small Finance Bank MD and CEO Sanjay Agarwal.

Agarwal said with increasing granularity of deposits and growing reach, the bank is well positioned to take advantage of the significant opportunities in the segments it is present in.