CLSA has downgraded Bandhan Bank to accumulate from buy and cut its target price to ₹190 per share following a weaker-than-expected Q2FY26 performance. The brokerage said net interest income (NII) and pre-provision operating profit (PPoP) came in soft, while credit costs remained elevated.
It noted that the microfinance (MFI) loan book continued to decline, although the pace of contraction has slowed. Net interest margin (NIM) fell by 60 basis points sequentially due to yield cuts and repo rate pass-through, leading to subdued profitability. However, CLSA believes the worst may be behind, with NIMs likely bottoming out and expected to recover in FY27 as funding costs stabilise and loan mix normalises.
The brokerage highlighted that Bandhan’s focus on diversifying beyond microfinance remains key to improving asset quality consistency and reducing volatility in earnings. It expects profitability to improve gradually as the MFI book stabilises and credit costs moderate in the second half of FY26.
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