FINOPB - Fino Payments Bank Limited Share Price

In the Q1 FY '26 earnings call, management provided an outlook emphasizing a commitment to risk-calibrated growth. Although facing heightened regulatory scrutiny and challenges like increased digital fraud, Fino Payments Bank is prioritizing sustainable growth over short-term gains. Management reported a cautious approach to account additions, with 7 lakh new accounts added, bringing the CASA account base to nearly 1.5 crores. The average deposits for the quarter rose 34% year-on-year to INR 2,275 crores, and renewal income increased by 38% year-on-year to INR 56 crores.

Key forward-looking points highlighted include:

1. CASA and Digital Payments: Although the company is currently experiencing some moderation in account growth due to regulatory measures, management expects customer acquisition to improve in Q2 FY '26. The focus remains on enhancing account balances and quality of customers.

2. Digital Transaction Growth: Management reported handling transactions worth approximately INR 68,000 crores, which constitutes 55% of total throughput. They are adopting a cautious approach to merchant onboarding due to regulatory changes, which may temper growth but is deemed essential for sustainable expansion.

3. Cost Management: Operating costs have increased slightly, attributed to inflation and compliance-related expenses. Cost-to-income ratios are expected to remain consistent in the range of 25-26%.

4. Technology Investment: Core banking system migration is underway, expected to complete by year-end, enhancing operational efficiency in customer service and product offering capabilities.

5. SFB License Application: The bank has formally applied for a small finance bank license and is hopeful of starting lending operations within a year after receiving in-principle approval.

Overall, management maintains that while external factors pose challenges, their long-term strategy is centered on disciplined growth, improved customer experience, and continuous investment in technology.

Q&A Section Summary from the Fino Payments Bank Earnings Call - July 31, 2025

Question 1: "Can you elaborate on the mule accounts you mentioned? The addition rate seems good, yet there's commentary on mule accounts affecting CASA performance?"

Answer: Mule accounts are fraudulent accounts, primarily in certain districts. Their closure due to regulatory measures has led to a 5-8% drop in active CASA merchants, causing some slowdown in CASA growth. Additionally, muted government disbursements further impacted our account additions. The decline in these accounts resulted from necessary compliance actions, which concurrently affected our CASA numbers.

Question 2: "On the remittance business, the dip seems significant. Is this only due to regulatory disruptions?"

Answer: The remittance dip is due to two main factors: new RBI regulations from November 2024 made bank-led domestic money transfers more stringent and non-compliant alternatives have gained ground. Additionally, increased UPI usage has shifted customer preferences away from remittances to direct bank transfers.

Question 3: "Given the competitive landscape, do you see an impact on your ability to charge fees?"

Answer: Yes, the competition from public sector banks waiving minimum balance requirements is notable. However, Fino's unique market position"”quick account openings through our extensive merchant network"”remains a competitive advantage. As such, I don't foresee significant impacts on our renewal rates or additions.

Question 4: "Is there a possibility of achieving a growth target of 20% in the near future?"

Answer: We're focusing on sustainable bottom-line growth rather than committing to a specific top-line guidance. While once relevant, the 20% projection no longer fits with current realities. Our strategy is now centered on recovering lost revenue, particularly from the remittance sector, and exploring new products to drive future business.

Question 5: "Can you provide clarity on your technology-related costs and how they impact your P&L?"

Answer: Our technology costs, including depreciation, were approximately INR 37 crores for Q1. The core banking system will be capitalized, and we will recognize associated depreciation once implemented. Technology costs are expected to stabilize around this range in the next few quarters.

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