Bandhan Bank Expects Strong Profit Growth From Q3

Bandhan Bank Ltd.'s quarterly profit can see a strong growth from the third quarter of the current financial year, according to Chief Executive Officer Partha Pratim Sengupta.

In a conversation with NDTV Profit on Friday, Sengupta predicted higher quarterly profit ahead due to multiple factors, including a slowdown in slippages in the microfinance segment.

The bank’s operating profit was impacted by a reduced microfinance book, but the FY26 looks optimistic, Sengupta said.

"We believe quarterly profits will improve significantly going forward, primarily because slippages in our microfinance book are decelerating. While Q1 and Q2 may remain a little bit of a problem, we expect stability from Q3 onwards," the MD said.

Commenting on the results, he said that the write-offs were split between Q3 and Q4, leading to a higher profit due to lower provisions. The bank's net profit in Q4 FY25 increased nearly six times to Rs 318 crore from Rs 55 crore in the year-ago quarter.

Sengupta expects higher quarterly profits ahead as he cited a few key reasons, including a slowdown in slippages in the microfinance segment.

"We weren't insulated from the challenges faced nationwide. As a result, we had to make strategic decisions, including containing our loan book in certain geographies," Sengupta said.

This led to a slowdown in growth and a decline in outstanding loans. Since demand in microfinance is much higher than in the secured book, the bank's operating profit was slightly impacted, according to the CEO.

In terms of sustainability, the lender is also focussed on becoming a universal bank by diversifying its products. This is the reason its secured loan book grew last year, increasing from 23% to 50.5% in FY25.

"As part of our strategy to become a more universal bank, we've significantly increased our secured loan portfolio, from 23% last year to 50.5% in FY25. While this may slightly impact yields, the overall business volume will drive profits," he explained.

Snegupta also added that the lender is planning to launch new income streams from services like payments, which could aid profitability.

Commenting on the pressure on net interest income, the CEO acknowledged the decline in Q4 but maintained optimism for FY26. "We have rationalised our cost of funds, particularly deposits. While the impact on term deposits will be gradual, we expect the effect to be significant in the coming quarters," he said.

On the impact of the RBI's rate cut, Sengupta acknowledged that it will be felt, especially in Q1 and Q2. However, he believes that by Q3, the bank will be able to mitigate much of this impact.

"Currently, 55% of our loan book is under fixed income, 5% through MCLR, and 40% linked to EBR, with immediate transmission already taking place. While 40% of our loans may be impacted by rate cuts in Q1 and Q2, we expect to see the benefits of our deposit rationalisation from Q3 onwards," Sengupta said.

Fall in provisions pushed Bandhan Bank's standalone net profit to a nearly sixfold jump in the fourth quarter of financial year 2024-25, but still missed analysts' estimates.

Shares of Bandhan Bank closed 2.38% lower at Rs 161.7 apiece on the BSE, compared to a 0.32% advance in the benchmark Sensex on Friday.