CLSA has reiterated its High Conviction Outperform rating on Bandhan Bank, setting a target price of ₹220, which implies a 19% upside from the current market price of ₹185.40. While the bank’s Q1FY26 performance came in below estimates on core metrics, CLSA remains optimistic about an improvement in fundamentals going forward.
The brokerage flagged that both net interest income (NII) and core pre-provision operating profit (PPOP) missed expectations, primarily due to slower loan growth and weaker fee income. Additionally, CASA performance disappointed, with the ratio declining by 400 basis points.
Despite these concerns, CLSA noted that slippages were slightly better than estimates, indicating some early signs of stability in asset quality. Importantly, the brokerage believes the pace of MFI book reduction will now slow, which should help ease pressure on margins.
CLSA expects the impact of the June repo rate cuts to start reflecting in Q2FY26, which should mark the bottoming out of net interest margins (NIMs). Furthermore, it anticipates a material improvement in credit costs during the second half of the fiscal year.
However, reflecting the near-term pressures, CLSA has cut its earnings estimates by 13–36% to account for the lower PPOP growth trajectory. Still, it sees attractive long-term value in the stock.
Disclaimer: The brokerage view is based on publicly available research and does not constitute investment advice. Please consult a certified financial advisor before making any investment decisions.
