Bandhan Bank’s shares experienced a decline of over 3% in early trading on July 17, following the release of the bank’s underwhelming earnings report for the April-June quarter. The financial results fell short of market expectations, resulting in a negative impact on the bank’s stock performance.
During the first quarter of fiscal year 2023-24, Bandhan Bank recorded a net profit of Rs 721 crore, representing a 19% decrease compared to Rs 886 crore in the same period the previous year. The reported figures also failed to meet CNBC-TV18’s estimated net profit of Rs 761.4 crore.
Furthermore, the bank’s net interest income experienced a year-on-year decline of approximately 1% to Rs 2,490.8 crore, down from Rs 2,514.4 crore in the corresponding period last year. This figure also fell short of CNBC-TV18’s estimated net interest income of Rs 2,572.9 crore.
Adding to the disappointing results, Bandhan Bank witnessed a deterioration in its asset quality during the reviewed quarter. The gross non-performing assets (NPAs) rose to 6.76%, compared to 4.87% in the previous quarter, while the net NPAs increased from 1.17% to 2.18% during the same period.
As of 9:18 a.m., Bandhan Bank shares were trading at Rs 216.85, reflecting a 2.14% decline on the National Stock Exchange.
Following the weaker-than-expected quarterly performance, brokerages expressed concerns regarding Bandhan Bank’s asset quality. Nuvama Institutional Equities highlighted the bank’s high forward flow and evolving ECLGS disclosures, suggesting that its asset quality has not yet fully stabilized, unlike its peers. The firm issued a ‘hold’ call for the stock with a price target of Rs 242.
Motilal Oswal Financial Services remained cautious about the bank’s asset quality and its high SMA book, despite expectations of recoveries from CGFMU and ECLGS in FY24. Consequently, the brokerage reduced its net profit/PPoP estimates for FY24/FY25 by 5%/3% and maintained a ‘neutral’ stance on the stock, with a target price of Rs 240.
Nomura also adjusted its price target for Bandhan Bank, lowering it by 17% to Rs 270. However, the firm retained its ‘buy’ rating for the bank and revised down its FY24-26 EPS estimates by 11-14% to account for the weak quarterly performance.
While Jefferies expects an improvement in loan and net interest income growth from Q2 onwards, the firm reduced its price target for the stock to Rs 280. It acknowledged that the Q1 slippages included one-time additions due to changes in norms but stated that the bank’s coverage remained sufficient.
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**Disclaimer: The above article is for informational purposes only and should not be construed as financial advice or a recommendation to invest in Bandhan Bank.**
