Shares of Bandhan Bank surged over 4% on February 21 after global brokerage CLSA upgraded its rating to ‘High Conviction Outperform’, assigning a target price of ₹220 per share. This upgrade suggests a 54.6% upside from the current market price. The brokerage firm believes that Bandhan Bank is well-positioned in the ongoing Microfinance Institution (MFI) recovery cycle and is performing better than its peers. With the bank gradually shifting its portfolio towards secured lending, CLSA sees this transition as a key factor in reducing risk exposure while ensuring steady growth.
CLSA also highlighted the impact of the new management team, stating that it does not carry any legacy baggage and is steering the bank toward a more structured and risk-mitigated approach. Additionally, Bandhan Bank does not currently require additional capital, and its valuations remain highly attractive compared to other players in the financial sector. This combination of portfolio diversification, strong management, and healthy capital positioning makes the bank a compelling investment, according to the brokerage.
Despite the 41.8% year-on-year decline in net profit for the third quarter of FY25, Bandhan Bank’s fundamentals remain strong. The bank reported a net profit of ₹426.5 crore, compared to ₹732.7 crore in the corresponding quarter last year. However, Net Interest Income (NII), which represents the difference between interest earned on lending and interest paid on deposits, increased by 12.1% year-on-year to ₹2,830.3 crore, up from ₹2,525.4 crore in Q3 FY24. The bank’s gross non-performing asset (GNPA) ratio remained stable at 4.68%, while the net NPA stood at 1.28%, showing marginal improvement from 1.29% in the previous quarter. Furthermore, gross advances grew by 14% year-on-year, reaching ₹1.32 lakh crore as of December 31, 2024, compared to ₹1.16 lakh crore in the previous year.
While the decline in net profit might be a concern, the strong growth in NII, asset quality stability, and increasing loan book size indicate that Bandhan Bank is well on track for recovery. With a shift towards secured lending and a clear long-term growth strategy, analysts at CLSA remain optimistic about the bank’s potential to deliver consistent performance in the coming years.
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