Bandhan Bank sinks 11% in 2 days on disappointing December quarter results

MOSL maintains ‘neutral’ rating on Bandhan Bank on the back of rising asset quality concerns
Shares of Bandhan Bank tanked 6 per cent to Rs 321 on the BSE on Friday, down 11 per cent in the past two trading days, after the lender reported a weak set of numbers for the December quarter (Q3FY21). The private sector lender's net profit fell 13.5 per cent year-on-year (YoY) to Rs 633 crore as the bank took accelerated additional provision on standard assets amounting to Rs 1,000 crore on account of Covid-19.

However, operating performance remains strong, led by higher net interest income (NII) as margin improved 30 basis points (bps) sequentially, while assets under management (AUMs) grew at 23 per cent YoY. NII for the quarter grew by 34.5 per cent to Rs 2,072 crore as against Rs 1,540 crore in the corresponding quarter of the previous year.

Bandhan Bank reported a sharp deterioration in asset quality trends with pro-forma gross non-performing assets (GNPA) ratio increasing to 7.1 per cent while collection efficiency in the microfinance institution (MFI) portfolio in its core state of Assam has witnessed a sharp decline, Motilal Oswal Securities said in results update.

"The bank has made higher Covid-related provisions of Rs 1,000 crore during Q3FY21, pre-dominantly towards rising stress in Assam, thus taking additional provisions to 3.6 per cent of loans to manage higher delinquencies in coming quarters," the brokerage added. 

Operating performance remains strong and continues to demonstrate strong deposit performance, led by retail deposits, the brokerage further said while maintaining a ‘neutral’ rating on the stock on the back of rising asset quality concerns.

"Bandhan Bank reported a sharp surge in NPA denting improved operating performance. Proforma based GNPA saw a meaningful spike, GNPA ratio (proforma) increased to 7.12 per cent from 1.5 per cent levels QoQ. Collection efficiency declined from 94 per cent in September 2020 to 92 per cent in January 2021. The growth of NII was on account of 30 bps rise in the NIMs sequentially," ICICI Securities said in a note.

In the past one month, the stock of Bandhan Bank has dipped 19 per cent as compared to a 7 per cent rise in the S&P BSE Sensex. At 11:59 am, it was trading 5 per cent lower at Rs 325 as against a 0.50 per cent decline in the benchmark index. A combined around 19 million equity shares changed hands on the counter on the NSE and BSE.


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