Bandhan Bank Q2 Results Review Healthy Earnings Growth; Asset Quality Deteriorates: Motilal Oswal

Motilal Oswal Report

Bandhan Bank Ltd. reported Q2 FY25 profit after tax at Rs 9.4 billion (30% YoY growth, 7% beat), led by healthy other income and contained provisions.

Net interest income grew 21% YoY to Rs 29.5 billion (inline). Margins moderated 20 bp QoQ to 7.4%. Other income grew 10% YoY to Rs 5.9 billion (7% beat).

Opex grew 21% YoY/ 6% QoQ to Rs 16.9 billion (in line). Cost/income ratio increased to 47.6% in Q2 FY25.

Business growth was healthy, with net advances growing 23.6% YoY/3.7% QoQ and deposits up 27.2% YoY/7% QoQ. CASA ratio moderated slightly to 33.2%.

Gross/net non-performing asset ratios deteriorated by 45bp/14bp QoQ to 4.68%/1.29%. Slippages increased to Rs 11.1 billion versus Rs 8.9 billion in Q1 FY25 due to stress in MFI. SMA book increased 100 bp QoQ to 3.3%. 

We cut our earnings estimates for FY26 by 7% and expect FY26E RoA/RoE of 1.9%/16.3%. Reiterate Neutral with a revised target price of Rs 190 (premised on 1.2 times FY26E adjusted book value).

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