Bandhan Bank declines 3% as Q1 earnings disappoint Street

Bandhan Bank’s asset quality also deteriorated in the April-June period as net as well as gross NPAs increased on quarter.

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Shares of Bandhan Bank fell over 3 percent in early trade on July 17 on poor earnings for the April-June quarter.

The lender’s net profit for the first quarter of fiscal 2023-24 slipped 19 percent to Rs 721 crore, down from Rs 886 crore a year back. The bottomline too missed the CNBC-TV18 estimate of Rs 761.4 crore.

In addition, net interest income fell around 1 percent on-year to Rs 2,490.8 crore from Rs 2,514.4 crore in the year-ago period. It also lagged CNBC-TV18’s estimate of Rs 2,572.9 crore.

On top of it, the bank’s asset quality also deteriorated in the quarter under review as gross non-performing assets (NPAs) rose to 6.76 percent as against 4.87 percent in the preceding quarter. Net NPAs also increased to 2.18 percent from 1.17 percent seen in the previous quarter.

At 9.18am, the shares of Bandhan Bank were trading with a cut of 2.14 percent at Rs 216.85 on the National Stock Exchange.

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Going by the weaker-than-expected quarterly performance from the lender, brokerages also expressed some concerns over Bandhan Bank’s asset quality.

Brokerage firm Nuvama Institutional Equities reckons that the lender’s asset quality is still not fully stabilised as against a marked
improvement for peers, due to its continued high forward flow and evolving ECLGS (Emergency Credit Line Guarantee Scheme) disclosures. Likewise, the firm has a ‘hold’ call for the stock, with a price target of Rs 242.

Motilal Oswal Financial Services also remains watchful of the lender’s asset quality and the high SMA (Special Mention Accounts) book despite expectations of recoveries from CGFMU (Credit Guarantee Fund for Micro Units) and ECLGS in FY24. Hence, the brokerage also cut its estimates for net profit/PPoP (Pre-provision operating profit) for FY24/FY25 by 5 percent/3 percent. MOFSL also reiterated its ‘neutral’ stance on the stock with a target price of Rs 240.

Nomura also slashed its price target for the stock by 17 percent to Rs 270, though it retained its ‘buy’ rating for Bandhan Bank. The global research and broking firm however, also cut its FY24-26 EPS estimates by 11-14 percent to bake in the weak quarterly numbers.

Even though Jefferies expects the loan and NII growth to improve from Q2 as disbursements pick-up and base goes down, it cut its price target for the stock to Rs 280. It also believes that slippages in Q1 included one-time additions due to a change in norms but feels the lender’s coverage remain sufficient.

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