Bandhan Bank Ltd. is likely to remain in focus after reporting a 35% year-on-year rise in June-quarter net profit, aided by lower provisions, while brokerages remained divided on the lender's recovery prospects following a more conservative profitability outlook.
The private lender reported a standalone net profit of Rs 502 crore for the quarter ended June, up from Rs 372 crore a year earlier. Net interest income rose 6% year-on-year to Rs 2,921 crore, while the net interest margin remained steady at 6.2% sequentially. Asset quality also improved, with gross NPA declining to 3.15% from 3.27% in the previous quarter and net NPA easing to 0.93% from 0.97%. A sharp reduction in provisions to Rs 683 crore, from Rs 1,147 crore a year ago, supported earnings growth.
Following the results, Jefferies reiterated its 'Buy' rating and raised its target price to Rs 240 from Rs 215, saying stronger loan growth, fee income and improving microfinance asset quality helped the bank beat profit estimates. The brokerage expects the stock to consolidate after management lowered its FY27 exit return on assets (RoA) guidance to reflect higher funding costs and operating expenses, but believes valuations should cushion downside risks.
BofA Securities also maintained a 'Buy' rating with a Rs 220 target price. It said credit costs moderated during the quarter, though elevated operating expenses prompted management to lower its exit FY27 RoA guidance to 1.2%-1.4%.
In contrast, Macquarie retained its 'Underperform' rating with a Rs 130 target price, citing an uncertain recovery path. The brokerage believes margin expectations have weakened, credit costs remain elevated and downward revisions to profitability guidance could keep the stock under pressure.
Brokerages on Bandhan Bank
BofA
- Maintain Buy; Target Price: Rs 220.
- Q1 saw an improvement in credit costs, but return on assets (RoA) aspirations have been pushed out.
- PAT was in line with estimates.
- Exit FY27 RoA guidance has been lowered to 1.2-1.4%.
- Credit costs moderated, but operating expenses remained elevated.
Macquarie
- Maintain Underperform; Target Price: Rs 130.
- Sees an uncertain road to recovery.
- PAT missed estimates.
- Margin outlook has been lowered, while credit costs remain elevated.
- RoA guidance has been revised down due to higher cost pressures.
Jefferies
- Maintain Buy; Hike target price to Rs 240 from Rs 215.
- A steady quarter, though the stock could consolidate following conservative guidance.
- Profit beat estimates, supported by better loan growth, higher fee income and improved MFI asset quality.
- Management lowered exit FY27 RoA guidance to reflect higher funding costs and operating expenses.
- Cuts estimates by up to 10%, but believes current valuations provide downside support.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
