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Bandhan Bank Q1 Results Review


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Financial Performance:

Bandhan Bank Ltd. reported credit de-growth of ~5.5% QoQ, which was led by a slowdown in the emerging entrepreneurs business segment (impacted by elevated slippages and seasonal slowdown) and a large repayment of one short-term loan to the tune of ~Rs 2,150 crore in the retail segment.

Total disbursements de-grew sharply by ~54% QoQ, led by a 62% QoQ dip in EEB disbursements. In line with our expectations, net interest income growth was flat YoY/QoQ. However, margins remained stable QoQ at 7.3%.

Pre-provision operating profit de-grew by 14%/13% YoY/QoQ owing to notably lower non-interest income and higher opex on the back of continued branch expansion. Credit costs moderated to 240 basis points versus 300 bps QoQ. Profit after tax de-grew by 19%/11% YoY/QoQ. 

Asset quality deteriorated sharply owing to higher slippages and lower recoveries. Gross non-performing asset climbed up to 6.7% vs. 4.9% QoQ.

Gross slippages including the impact of new IRAC norms (to the tune of Rs 580 crore) stood at Rs 1,940 crore.


Bandhan Bank has been battling asset quality issues mainly owing to the impact of the pandemic and this has been the key reason for the sharp de-rating in the stock. However, we expect asset quality to improve from H2 FY24 onwards and it will be aided by better recoveries and lower slippages.

We expect Bandhan bank to deliver an return on asset/return on equity of 2.2-2.5%/17-20% over FY24-25E versus 1.5/11.9% in FY23, backed by better growth and lower credit costs as compared to FY23.

However, we trim our earnings estimates by 9-10% over FY24-25E, factoring in slower-than-expected growth, slightly lower margins, and lower non-interest income.

Valuation and recommendation

The stock currently trades at ~1.4 times FY25E adjusted book value (versus the long-term average of ~3.3 times P/ABV) and we value the stock at 1.6 times FY25E to arrive at a target price of Rs 255/share. The target price implies an upside of 15% from the current market price. We maintain our ‘Buy’ recommendation on the stock.

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