Bandhan Bank Q1 Results Review - Better-Than-Expected Performance Due To Lower Provisions: Nirmal Bang

Nirmal Bang Report

Bandhan Bank Ltd.’s Q1 FY25 net interest income/pre-provision operating profit/profit after tax were at a variation of 4.6%/8%/31.9% versus our estimates. The results were much better than our expectations due to lower-than-estimated provisions. Loans and advances grew by 21.8% YoY on the back of growth across all verticals.

Deposits grew by 22.8% YoY, which was higher than advances growth, supported by 24.9% YoY growth in Retail TD. Sequentially, CASA growth was impacted by reduction from short term CA balance in the previous quarter.

Gross non-performing asset/net non-performing asset stood at 4.2% / 1.1% versus 3.8% / 1.1% in Q4 FY24.

We have estimated earnings CAGR of 49.8% over FY24-FY26E on the back of 18.3% CAGR in the loan book and lower credit cost. We have valued Bandhan Bank at 1.2 times its June 2026E ABV (same as earlier, a 57.4% discount to five-year average price/adjusted book value) and we have derived a target price of Rs 217 (versus Rs 212 earlier).

In our view, the stock will see an overhang in the near to medium term due to the following reasons:

1. End result of the detailed audit on the directions of NCGTC,

2. How the succession at the top management level takes shape,

3. Frequent IBPC transactions in the Housing portfolio can be a concern in the long term with respect to the quality of the book being originated and

4. Higher C/D ratio at 94.3% can constrain growth, but the same can be managed by tapping the refinancing route.

Maintain Accumulate.

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