UBS has maintained its “Neutral” rating on Bandhan Bank, reducing the target price to ₹185 from ₹230. The revised target reflects a limited upside from the current market price (CMP) of ₹160.93.
Key highlights from UBS’s analysis:
- Earnings under pressure:
- Bandhan Bank’s earnings are expected to remain strained due to stress in its microfinance (MFI) portfolio.
- MFI stress driving higher costs:
- Increased credit costs and lower net interest margins (NIMs) are anticipated as a result of MFI stress.
- The bank’s MFI PAR (Portfolio at Risk) 1-90 days stood at 3.3% in Q2, comparatively lower than the industry average of 5.4% in November.
- EPS reduction:
- UBS has cut Bandhan Bank’s earnings per share (EPS) by ~11%, factoring in higher credit costs and declining NIMs.
While Bandhan Bank’s MFI portfolio shows better performance compared to the industry average, ongoing stress in the segment and reduced profitability metrics weigh on its outlook.
Disclaimer
This article is for informational purposes only and does not constitute investment advice. Readers should perform their own research or consult a financial advisor before making investment decisions.
