Bandhan Bank Q3 Results Review - Mixed Quarter; Other Income Drags Earnings: Motilal Oswal

Motilal Oswal Report

Bandhan Bank Ltd. posted a 7% miss on profitability at Rs 7.3 billion in Q3 FY24, dragged down by muted other income. Net interest income stood broadly in line.

Bandhan Bank's advances grew at a healthy rate of 20% YoY/8% QoQ, driven by robust growth in the micro finance institution and non-MFI portfolios. The MFI share in the total loan book stood at 50%, with the outstanding book currently at ~Rs 580 billion.

Deposit growth was healthy at 15% YoY/4.8% QoQ, driven by 5% QoQ growth in term deposits. Current account and savings account deposits declined by 2% QoQ. The CASA ratio, thus, declined 243 basis points QoQ to 36.1%.

Gross non-performing asset declined 30 bp QoQ to 7.0%, while elevated slippages (affected by system migration) were offset by recoveries and the sale of housing assets to ARC. Special mention account book declined 90 bp QoQ to 3.3%,which should reduce the slippage run rate going forward. Collection efficiency was steady at 99%.

We fine-tune our earnings estimates and expect FY25E return on asset/return on equity at 2.2%/17.7%. Reiterate Neutral with a target price of Rs 245 (1.5 times Sep-25E adjusted book value).

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