Fino Payments Bank Q1 net profit soars 85%, gets board approval to apply for SFB
Fino Payments Bank Q1 net profit soars 85%, gets board approval to apply for SFB
Fino Payments Bank, based in Navi Mumbai, reported a significant increase in its net profit for the June 2023 quarter. The bank’s net profit surged by 85 percent to reach Rs 19 crore, primarily driven by gains made on its treasury operations.
During the reporting quarter, Fino Payments Bank’s total income also saw substantial growth, rising to Rs 348 crore from Rs 289 crore in the same period the previous year. Notably, the bank’s income on investments more than doubled to Rs 25 crore, contributing to the overall increase in total income.
The bank has received approval from its board to pursue the conversion into a small finance bank. This conversion will enable Fino Payments Bank to broaden its range of services and undertake lending operations, thus expanding its scope of activities beyond the traditional payments banking services.
By converting into a small finance bank, Fino will be able to offer credit and lending products to its customers, thereby catering to a broader set of financial needs. This strategic move aligns with the bank’s growth plans and signifies its commitment to enhancing financial inclusion and services for its customers.
As the bank continues to diversify its operations and explore new avenues, its performance in the June 2023 quarter showcases positive momentum with increased net profit and robust total income. The transformation into a small finance bank is expected to further strengthen its position in the financial services sector and facilitate its expansion into various lending activities.
The second payments bank to commence its operations has reported significant growth in its operating profit from the treasury segment. For the current reporting period, the bank achieved an operating profit of Rs 23.28 crore, compared to Rs 13.38 crore in the same period the previous year.
At the entity level, the bank’s operating profit margin has also improved notably. The operating profit margin widened to 11.6 percent for the current period, up from 8.2 percent in the corresponding period a year ago.
This increase in operating profit and the improvement in operating profit margin indicate a positive trend in the bank’s financial performance. The growth in the treasury segment’s operating profit showcases the bank’s effective management of its treasury operations, leading to better financial results.
The widening of the operating profit margin at the entity level indicates improved cost efficiency and overall financial health. It suggests that the bank has managed to optimize its expenses and generate higher profits for each unit of revenue earned.
Overall, these financial indicators highlight the bank’s successful operational strategies and financial management practices, resulting in a favorable financial performance for the reporting period. As the bank continues to evolve and expand its services, such positive trends are likely to contribute to its overall growth and success in the financial services industry.
As of June, the payments bank had an impressive customer base with 14.4 lakh registered merchants and 82.9 lakh current and savings accounts. During the reporting quarter, the bank witnessed remarkable growth, as it opened 7.7 lakh new bank accounts.
Throughout the financial year 2022-23 (FY23), the bank experienced substantial customer acquisition, adding an average of 2.5 lakh customers per month. This steady growth indicates a strong demand for the bank’s services and demonstrates its ability to attract and retain customers.
Looking ahead, the bank aims to expand its offerings and diversify its operations. The managing director and chief executive, Rishi Gupta, mentioned the bank’s plan to supplement its payments bank business by providing lending services to existing customers. The bank intends to enhance its license to undertake lending operations, which will allow it to cater to the financial needs of its established customer base.
The bank’s decision to explore lending opportunities is driven by the significant opportunity it sees in leveraging its existing network and customer relationships. By adding lending services to its portfolio, the bank can provide a more comprehensive suite of financial products, further strengthening its position in the market.
Overall, the bank’s robust customer base, consistent growth in customer acquisition, and strategic plans to diversify its offerings showcase its potential for further expansion and success in the financial services industry.
According to the Chief Financial Officer (CFO) Ketan Merchant, the small finance bank (SFB) being set up by Fino Payments Bank will have a distinct approach compared to existing players in the market. The SFB intends to generate a significant portion of its revenues from fees during the initial years of operation. Specifically, the bank aims to derive 75-80 percent of its revenues from fees and other non-interest income sources.
This focus on fee-based revenue streams is a strategic move by the bank to diversify its income sources and reduce its reliance on interest income. By offering a range of fee-based services and products, the bank can enhance its revenue generation capabilities and potentially achieve more stable and predictable income streams.
Investors responded positively to this announcement, leading to a surge in Fino’s scrip on the stock market. On Friday, the Fino scrip closed 17.85 percent higher at Rs 343.90 per share on the Bombay Stock Exchange (BSE). In contrast, the overall market experienced a slight correction with a 0.16 percent decline on the benchmark index.
The market’s positive response indicates investors’ confidence in the bank’s growth prospects and its differentiated approach in the small finance bank segment. As Fino Payments Bank evolves into an SFB and expands its operations, its ability to generate substantial fee-based revenues could position it favorably among its peers in the financial services industry.
