Shares of Bandhan Bank Ltd. fell on Monday after most analysts maintained 'sell' on the stock following a decline in the private lender's first-quarter profit.
Brokerages cited a deterioration in the bank's asset quality and weak growth in both microfinance and current account savings accounts, according to analysts.
The bank's net profit declined 10.77% quarter-on-quarter to Rs 721.05 crore in the quarter ended June, according to an exchange filing. The total operating profit fell 12.97% quarter-on-quarter to Rs 1,563 crore.
Brokerages Views
Ambit Capital Pvt.
Maintains ‘sell' with a target price of Rs 155.
Asset quality deterioration is seen across the board.
Microfinance's annualised slippage rate was 11%.
The overall elevated credit cost stood at 2.4% versus management's guidance of 1.8–2.2% for FY24.
Assets under management growth is much lower than the stated guidance of 20% year-on-year.
Deposit mobilisation looks challenging for the bank, with a CASA decline of 3% YoY.
Expected RoE of less than 15% in FY24–25.
Investec
The brokerage reiterates ‘sell' with the target price revised from Rs 200 to Rs 180.
Weak quarter due to the seasonality of the MFI portfolio, leading to weaker pre-provisional operating profit and higher asset quality stress.
A pivot to the secured portfolio weakens operating performance.
Overall advances grew by 6.7% YoY.
Growth remains weak in both MFI and CASA.
Estimate lower normalised growth of 16% and RoE of 14%.
Nomura
The brokerage maintains ‘buy' with the target price reduced from Rs 325 to Rs 270.
Profit after tax was ahead of estimates, with the beat largely led by a sharply lower credit cost of 2.6%.
The PAT beat was aided by a lower provisioning coverage ratio of 69%.
The brokerage said that the recoveries from the credit guarantee fund for microunits will be a key monitorable over the near term.
Pick-up in growth outlook is essential for re-rating.
Cuts overall loan book estimates by 3% across FY24–26F.
Expected RoE of 18-19% over FY24-26F.
Shares of Bandhan Bank fell 3.02% to Rs 214.90 apiece, compared to a 0.28% rise in the benchmark NSE Nifty 50 at 12:00 p.m.
The stock declined 3.38% intraday. The total traded volume so far in the day stood at 5.1 times its 30-day average. The relative strength index was at 32.94, implying that the stock was neither overbought, nor oversold.
Of the 28 analysts tracking the company, 22 maintain a ‘buy', four recommend a ‘hold', and two suggest a ‘sell' on the stock, according to Bloomberg data. The average 12-month consensus price target implies an upside of 28.8%.
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