FridayOL

AU Small Finance Bank is sharpening its focus on cost optimisation and bolstering its retail lending portfolio, according to MD & CEO Sanjay Agarwal. In a recent Q&A session, Agarwal clarified that while corporate finance remains a potential avenue for growth, it isn't the bank’s immediate priority. This strategic decision reflects a commitment to strengthening the bank’s core strengths and navigating the current economic landscape effectively.

Lowering the Cost of Funds: A Key Objective

Agarwal highlighted that the bank's most pressing concern is reducing its cost of funds. This is a critical factor impacting profitability and competitiveness in the current interest rate environment. By actively managing its funding sources and exploring more efficient options, AU Small Finance Bank aims to improve its margins and enhance shareholder value. This involves a careful evaluation of deposit rates, wholesale funding strategies, and overall liquidity management.

Retail Lending Remains the Core Focus

While cost reduction takes centre stage, retail lending continues to be the cornerstone of AU Small Finance Bank’s growth strategy. The bank has established a strong presence in the retail segment, catering to a diverse range of customers with tailored loan products. This includes housing loans, vehicle finance, personal loans, and loans for small and medium-sized enterprises (SMEs). The bank intends to maintain this focus, leveraging its expertise and distribution network to expand its retail lending business.

Corporate Finance: A Future Consideration

Acknowledging the potential of corporate finance, Agarwal emphasized that it's not the bank's immediate agenda. The decision to defer significant investment in this area is a calculated one, allowing the bank to concentrate on its core competencies and manage risks effectively. While the bank may explore select corporate lending opportunities that align with its risk appetite and strategic objectives, it won't be a primary driver of growth in the near term. This measured approach allows AU Small Finance Bank to build a solid foundation before venturing into more complex financial activities.

Navigating the Economic Landscape

The bank’s strategy also reflects the broader economic climate and regulatory environment in Singapore. With ongoing uncertainty in the global economy, AU Small Finance Bank is adopting a prudent and conservative approach to risk management. By prioritising cost efficiency and retail lending, the bank aims to weather any potential economic headwinds and maintain its financial stability. This focus on fundamentals positions the bank for sustainable long-term growth.

Looking Ahead

AU Small Finance Bank’s current strategy underscores its commitment to delivering value to its customers and shareholders. By focusing on cost reduction and retail lending, the bank is laying the groundwork for a strong and resilient future. The decision to postpone significant investment in corporate finance demonstrates a pragmatic approach to growth, ensuring the bank remains well-positioned to capitalize on opportunities when they arise. The bank’s leadership team remains confident in its ability to navigate the challenges ahead and achieve its long-term goals, solidifying its position as a leading small finance bank in Singapore.