Bandhan Bank’s shares surged over 8% after the bank reported a 30% increase in profit, rising to ₹937 crore from ₹721 crore. This growth was fueled by a 21% rise in net interest income (NII), which reached ₹2,948 crore. The bank’s net interest margin also expanded to 7.4% from 7.2%, indicating improved profitability.
However, concerns over the bank’s asset quality have emerged as Gross NPA increased to 4.68% from 4.23% (QoQ), and Net NPA rose to 1.29% from 1.15% (QoQ). This deterioration, coupled with rising slippages, has raised questions about the bank’s risk management practices.
As of 9:23 am the shares were trading 7.92% higher at ₹181.53
Brokerage Outlook:
- CLSA has reiterated an Outperform rating on Bandhan Bank, setting a target price of ₹240, which implies a potential upside of 41.8% from the current market price of ₹169.20.
Key Insights from CLSA’s Report:
- Stable Slippages in Microfinance: Despite asset quality concerns, slippages in the bank’s microfinance business have remained range-bound, a positive sign for the segment.
- Secured Loans Drive Growth: Bandhan Bank’s loan growth continues to be driven by its secured loan portfolio, providing stability to its overall lending operations.
- Improving Fundamentals: With previous challenges cleared and fundamentals improving, CLSA expects the stock to re-rate in the coming quarters.
While Bandhan Bank faces challenges with asset quality, the growth in profit and NII, along with stable loan growth, continues to support a positive outlook for the bank.
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