ICICI Securities downgrades Bandhan Bank to Add, target price Rs 185
ETMarkets.com
Financials
Bandhan Bank reported muted Q4FY25 PAT of Rs 3.2 billion (RoA of 0.7%). Loan growth was slower, at 4% QoQ (10% YoY), while NIM continued its moderating trajectory (down 20bps QoQ to 6.7%) as growth remained driven by secured loans. Slippages inched up QoQ but were broadly in line at ~5.1% QoQ (vs. 4.9% QoQ). SMA 0+1+2 improved to 3.3% vs. 3.8% QoQ. However, SMA0 in West Bengal (WB) flared up to 2.3% (vs. 0.9%) due to localised issues and bunched-up holidays, though this has been partly rolled-back as on date, as per management. Exposure to Karnataka and Tamil Nadu is limited at ~1% each of the EEB book. The bank believes that credit costs have peaked, though should remain elevated in H1FY26 with improvement in H2FY26. Despite building in ~14?15% YoY growth, PPOP growth is likely to be muted for FY26? 27E due to pressure on NIM (unfavorable loan mix change) and opex growth outpacing loan growth.
Investment Rationale
Post the risk-weight rollback by RBI, Tier-1 at Bandhan Bank has jumped to 17.9%, suggesting a strong capital buffer. ICICI Securities appreciates management's strategy of focusing on secured products to drive growth and structurally reducing embedded risk in the business. While the bank seems well placed on the interest rate cycle with ~55% higher share of fixed rate loans and ~30% share of wholesale TD. However, continued loan mix change in favour of secured loans (~1,000bps differential) would continue to weigh on NIM; down ~30bps YoY in FY26, in our estimate. Bandhan Bank shall remain in investment phase with rising opex to assets ratio; thus leaving credit costs as the only lever for RoA (likely to play out in H2FY26). The stock trades at an inexpensive at ~1x/0.9x FY26E/FY27E ABV with stable ~1.5% RoA. The target price of Rs 185 (~1x FY27E ABV) is unchanged. Basis the current upside, I-Sec has revise Bandhan Bank?s rating to ADD (vs. Buy). Key risk is higher-than-estimated stress impacting profitability..
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Promoter/FII Holdings
Promoters held 39.98 per cent stake in the company as of 31-Mar-2025, while FIIs owned 22.73 per cent, DIIs 16.36 per cent.
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(You can now subscribe to our ETMarkets WhatsApp channel ICICI Securities has downgraded Bandhan Bank to Add from Buy with a target price of Rs 185. The current market price of Bandhan Bank is Rs 163.95 .Bandhan Bank reported muted Q4FY25 PAT of Rs 3.2 billion (RoA of 0.7%). Loan growth was slower, at 4% QoQ (10% YoY), while NIM continued its moderating trajectory (down 20bps QoQ to 6.7%) as growth remained driven by secured loans. Slippages inched up QoQ but were broadly in line at ~5.1% QoQ (vs. 4.9% QoQ). SMA 0+1+2 improved to 3.3% vs. 3.8% QoQ. However, SMA0 in West Bengal (WB) flared up to 2.3% (vs. 0.9%) due to localised issues and bunched-up holidays, though this has been partly rolled-back as on date, as per management. Exposure to Karnataka and Tamil Nadu is limited at ~1% each of the EEB book. The bank believes that credit costs have peaked, though should remain elevated in H1FY26 with improvement in H2FY26. Despite building in ~14?15% YoY growth, PPOP growth is likely to be muted for FY26? 27E due to pressure on NIM (unfavorable loan mix change) and opex growth outpacing loan growth.Post the risk-weight rollback by RBI, Tier-1 at Bandhan Bank has jumped to 17.9%, suggesting a strong capital buffer. ICICI Securities appreciates management's strategy of focusing on secured products to drive growth and structurally reducing embedded risk in the business. While the bank seems well placed on the interest rate cycle with ~55% higher share of fixed rate loans and ~30% share of wholesale TD. However, continued loan mix change in favour of secured loans (~1,000bps differential) would continue to weigh on NIM; down ~30bps YoY in FY26, in our estimate. Bandhan Bank shall remain in investment phase with rising opex to assets ratio; thus leaving credit costs as the only lever for RoA (likely to play out in H2FY26). The stock trades at an inexpensive at ~1x/0.9x FY26E/FY27E ABV with stable ~1.5% RoA. The target price of Rs 185 (~1x FY27E ABV) is unchanged. Basis the current upside, I-Sec has revise Bandhan Bank?s rating to ADD (vs. Buy). Key risk is higher-than-estimated stress impacting profitability..Promoters held 39.98 per cent stake in the company as of 31-Mar-2025, while FIIs owned 22.73 per cent, DIIs 16.36 per cent.
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