Bandhan Bank's Q4 net profit declines 80% due to higher provisioning

A very challenging year ended on a positive note with growth and collection coming back to normalcy, says Chandra Shekhar Ghosh, MD&CEO, Bandhan Bank
Kolkata-based private sector lender Bandhan Bank has reported an 80 per cent drop in net profit in the March quarter of FY21, missing Street estimates, due to higher provisions. In Q4FY21, the profit after tax of the lender fell to Rs 103 crore compared to Rs 517.3 crore in the same period last year. Sequentially, the net profit was down 84 per cent as in the December quarter it had recorded a profit of Rs 632.6 crore. 

Net interest income (NII) of the microfinancing lender grew 4.6 year-on-year (YoY) to Rs 1,757 crore but sequentially it was down 15.2 per cent, owing to the fact that after the apex court's order it had to reverse interest to the tune of Rs 538 crore on account of non-performing asset (NPA) recognition and interest on interest. 

Non-interest income, however, grew 57.4 per cent YoY and 42.3 per cent sequentially to Rs 787.3 crore in the same period, thereby taking the total income in the reporting quarter to 2,544.3 crore, up 17 per cent YoY but down 3 per cent sequentially. The net interest margin of the lender at the end of the March quarter stood at 6.8 per cent as opposed to above 8.3 per cent in Q3FY21 due to the interest reversal.

Provisions of the lender nearly doubled YoY to 1,594.3 crore in Q4FY21 as compared to Rs 827.4 crore in Q4FY20 and 1,068.7 crore in Q3FY21. The bank has written off loans to the tune of Rs 1,930 crore in the reporting quarter, and a large portion of it, about Rs 1,850 crore, is from the microfinance book, and for the full year, it was to the tune of Rs 2,038 crore. 

“Technically, as per our policy we could have retained these loans for a longer period of time but we decided to strengthen our balance sheet as fast as possible hence we have taken these accelerated write-offs," said Sunil Samdani, CFO, Bandhan Bank. 

Post-write-off, the gross NPA ratio of the lender at the end of March quarter stood at 6.8 per cent compared to 7.1 per cent in the previous quarter (proforma). The net NPA ratio stood at 3.5 per cent compared to 2.4 per cent in the previous quarter. 

During the quarter, the bank has restructured accounts carrying a value of Rs 617 crore of housing finance vertical comprising 0.71 per cent of the total portfolio of the bank. The bank management said they have not restructured advances in the microfinance book. 

“A very challenging year ended on a positive note with growth and collection coming back to normalcy. With accelerated provisioning and write-off, we are now well placed as we enter FY 22. We remain cautious but confident as we deal with the Covid19 second wave. We remain committed to our strategy that we have presented last quarter of granular, diversified, and quality growth,” said Chandra Shekhar Ghosh, MD&CEO, Bandhan Bank. 

Overall collection efficiency of the lender in their microfinance portfolio at the end of March quarter stood at 95 per cent, compared with 92 per cent at the end of December quarter. In West Bengal and Assam, the collection efficiency of the bank was 95 per cent and 83 per cent, respectively.

Top-up loans provided by the banks fell to Rs 260 crore in the March quarter as compared to Rs 920 quarter in the December quarter and the bank management said these loans were not provided to borrowers to avoid restructuring under the Reserve Bank of India’s (RBI’s) covid resolution package.

“As the economy started opening up, the demand for top-up loans, naturally, came down. So, we do not see this trend changing based on the assumption that the second wave should settle down in 2-3 months’ time. So, if that is the case, we do not see much increase in the top-up loans," said Samdani.

Total advances of the lender, including on book exposures, off-book exposures, and TLTRO, grew by 21.2 per cent to Rs 87,042.9 crore at the end of March quarter compared to Rs 71,846 crore in the year-ago period. On the other hand, total deposits of the bank grew by 36.6 per cent to Rs 77,972.2 crore in the same period. 




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