Bandhan Bank rises over 5% after Q3 results. Time to buy, sell or hold?


Shares of Kolkata-based private sector lender rallied 5.4% to Rs 249.85 in Monday’s trade even after the bank reported a 66.2% YoY dip in its December quarter profit at Rs 290.6 crore, while its net interest income (NII) dropped 2.1% on-year to Rs 2,080.4 crore.

The bank’s net NPAs as on December 31, 2022, improved to 1.9% against 3.0% as on December 31, 2021.

During the quarter, Bandhan Bank’s total deposits increased by 21% to Rs 1,02,283.2 crore, while total advances grew 11.1% to Rs 97,787.1 crore.

The bank’s PCR stood at 75.4% as on December 31, 2022, against 74.4% in the year-ago period while the capital adequacy ratio was at 19.1%. During Q3, it added 9 lakh new customers with the total customer base reaching 28.6 million.

Its net interest margin reduced to 6.5% on a quarter-on-quarter basis. Bandhan Bank said its banking outlets as of December-end stood at 5,723, including 1,250 branches and 4,473 banking units. During the quarter, the number of employees of the bank has gone up from 64,078 to 66,114.

Should you buy, sell or hold Bandhan Bank stock? Here’s what analysts say:

Kotak Institutional Equities
Kotak Institutional Equities maintained its add rating on Bandhan Bank with a target price of Rs 270 (from Rs 280 earlier).”We have had to cut our estimates by ~15% for FY2024-25 to reflect slower loan growth and loan mix shifting away from higher-yielding MFI loans. Though we have been cutting our estimates in recent quarters, mostly driven by higher loan-loss provisions, we see a very low probability of further downgrades. On the contrary, the risks appear mostly toward the upside. We like the franchise at these levels,” the brokerage said.

CLSA maintained its buy rating on Bandhan Bank post Q3 results with a target price of Rs 320. MFI stress is coming down on expected lines.

“We expect ROE of 19%-20% in-spite of a changing business mix Un-provided stress low now,” it said.

The global investment bank expects normalised provisioning now NIMs down, but at the bottom; we expect a sharp pick-up. Loans down due to write-offs.

Nuvama Institutional Equities
“Standard stress pool (1-90 DPD EEB loans) reduced sharply from 13.1% to 8.1% QoQ in Q3FY23, as guided. EEB slippage also fell from Rs 36 billion to Rs 28.5 billion with 90% from the disclosed stress pool. While NII growth missed estimates by a wide margin because of reversal and write-off, asset quality improvement is the overwhelming factor,” it said.

While the management seemed confident of the ongoing borrower behaviour corrections reflecting in the gradual abating of stress in its core EEB portfolio, we are cautious about any near-term outcomes from the bank’s hard pivot ahead. “We hack our FY23 estimates by 18% and our FY24/FY25 forecasts by 5-6%. We maintain our ADD rating with a revised TP of Rs 255 (1.9x Sep-24 ABVPS),” it said.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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