Bandhan Bank sinks as profit misses estimates and brokerages cut target prices

At 9:46 am, Bandhan Bank was quoting at Rs 244.95, down Rs 20.25 or 7.64 percent

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Bandhan Bank’s share price declined eight percent on October 31 after the private sector lender posted a net profit of Rs 209 crore for the September quarter against a loss of Rs 3,008 crore a year ago, far below Street expectations.

According to a CNBC-TV18 poll, analysts had expected net profit at Rs 749.8 crore.

At 9:46 am, Bandhan Bank was quoting at Rs 244.95, down Rs 20.25 or 7.64 percent. The share touched its 52 week high of Rs 349.50 and 52 week low of Rs 229.65 on 17 May 2022 and 27 December 2021 respectively. It is now trading 29.91 percent below its 52 week high and 6.66 percent above its 52 week low.

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Net interest income grew 13.3 percent year-on-year to Rs 2,193 crore, below expectations of Rs 2,422.9 crore.

Net interest margin (NIM) slipped 100 basis points quarter-on-quarter to seven percent from eight percent. Asset quality showed very little improvement with gross net performing assets (NPA) at 7.2 percent versus 7.3 percent a quarter ago and net NPA flat at 1.9 percent.

With slippages during the quarter in review at Rs 3,954 crore, analysts expect credit costs, which stood at 5.3 percent as against 2.7 percent in the June quarter, to remain high.

Speaking to CNBC-TV18, top boss at the bank Chandra Shekhar Ghosh said: “Slippages have come from pandemic-restructured accounts. Some of the slippages will continue in the coming quarters. NIM will remain between 7.5-8 percent and will normalise in the next two quarters.”

Analysts at domestic brokerage firm Motilal Oswal Financial Services have cut their FY23/FY24 earnings estimate by 18/11 percent. They have a neutral rating on the stock with a target price of Rs 300.

With a buy call on the stock, Bank of America Securities has cut its target price to Rs 355 per share. It has lowered earnings per share (EPS) estimates by 20-30 percent on lower NIMs and higher provisions.

Meanwhile, Credit Suisse has trimmed target price on the stock to Rs 330 from Rs 360. It expects credit costs to moderate in the second half of this fiscal but has cut FY23-25 EPS estimates by 9-19 percent.

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