New CEO, Credit Guarantee Payout Turn Brokerages Buoyant On Bandhan Bank

With the detailed forensic audit at Bandhan Bank Ltd. by National Credit Guarantee Trustee Co. now complete, and the RBI approval of the leadership change at the bank, brokerages are bullish on outlook for the bank.

Bandhan Bank Ltd. said on Thursday that it will receive a payout of Rs 314.68 crore from the NCGTC following the completion of a forensic audit. The revised amount considers exclusion of certain accounts which have been adjusted from the claim, the bank said.

Besides, the bank has also received an approval from the Reserve Bank of India to appoint banking industry veteran Partha Sengupta as its next chief executive officer and managing director, according to a separate statement to the exchanges.

• Conclusion of the audit 'with a relatively clean chit' for the bank, will be a breather for the street

• Focus will now be back to its fundamentals

• Total of Rs 550 crore accounted for as other income in the second half of the current fiscal.

• Over the past two quarter's, Bandhan's net slippage has moderated from a quarterly run rate of Rs 1,000 crore to Rs 500 crore.

• Over the same time period, the 30 days past due MFI book has now improved 600 basis points to 7.2%. While it may inch up a bit in September quarter due to macro trends, already factoring in credit costs (2.2%) that are higher than the management's guidance (1.8-2%). Hence, no major downside risks to the EPS for now.

• New CEO Partha Sengupta comes with a strong background

• Recovery from Credit Guarantees add to credibility

• Asset quality expected to behave better than other MFIs, albeit with some risks

• Expect a 15% ROE in the business

• Valuations look attractive at 1.1x FY26E price-to-book ratio