Shares of Bandhan Bank have shown a stable Net Interest Margin (NIM) of 7.6% quarter-over-quarter. The bank’s Assets Under Management (AUM) and deposit growth both experienced a year-over-year increase of 22-23%. Asset quality has improved, with the net non-performing loan (NPL) ratio holding steady at 1.2% quarter-over-quarter, despite the gross NPL ratio rising by 40 basis points to 4.2% QoQ. Additionally, slippages have decreased to 2.9%.
Bandhan Bank’s shares surged by 13.4% during intraday trading, reaching ₹218.20 per share—its highest level since February 2024. This rise followed the bank’s announcement of a profit after tax for the June quarter that exceeded analysts’ expectations.
Financial Performance Boosts Shares of Bandhan Bank: Profit After Tax Exceeds Expectations
On Friday, the bank reported a 47% increase in net profit, totaling ₹1,063 crore for the June 2024 quarter, up from ₹721 crore in the same period last year. This growth was attributed to controlled operating expenses and provisions.
For Q1 FY25, the bank’s net revenue reached ₹3,533 crore, a 23% increase from ₹2,876 crore in Q1 FY24. Net interest income (NII) for the quarter was ₹3,005 crore, marking a 21% rise from ₹2,491 crore in the previous year. The net interest margin (NIM) remained stable at 7.6% quarter-over-quarter.
Provisions (excluding tax) and contingencies for Q1 FY25 amounted to ₹523 crore, compared to ₹602 crore in Q1 FY24. Operating profit increased by 24% to ₹1,941 crore in Q1 FY25 from ₹1,562 crore in Q1 FY24, according to the company’s earnings report.
The bank’s gross non-performing assets (NPA) improved to 4.2% in Q1 FY25 from 6.8% in Q1 FY24, while net NPA decreased to 1.1% from 2.2%. The provision coverage ratio as of June 30, 2024, rose to 73.7% from 71.8% in the previous quarter.
Total deposits as of June 30, 2024, reached ₹1.33 lakh crore, reflecting a 23% year-over-year increase from ₹1.08 lakh crore. However, this represents a 1.5% decline from the previous quarter. The CASA ratio moderated by 372 basis points quarter-over-quarter to 33.4%.
Gross advances reached ₹1.26 lakh crore, marking a 22% year-over-year increase from ₹1.03 lakh crore and a 0.7% rise quarter-over-quarter, according to the earnings report.
The bank has projected an 18–20% growth in credit over the next 2-3 years and is targeting faster deposit growth compared to advances.
Should You Buy the Stock After Q1?
Following the June quarter results, analysts have updated their target prices for the stock.
Motilal Oswal has raised its earnings estimates for FY25 and FY26 by 10% and 11%, respectively. The brokerage now expects an FY26 Return on Assets (RoA) and Return on Equity (RoE) of 2.2% and 18.9%. It has maintained a ‘Neutral’ rating with a revised target price of ₹220, based on a 1.3x FY26E Adjusted Book Value (ABV) valuation.
Kotak Institutional Equities has reaffirmed its ‘Buy’ rating with an unchanged fair value estimate of ₹250. The brokerage views the bank as relatively undervalued, trading at 1.5x book value and 9x June FY2026E EPS. It forecasts RoEs to approach around 15%, positioning the bank favorably compared to its peers. Despite some recent unexpected outcomes, Kotak believes the bank is well-positioned for potential re-rating, despite ongoing macroeconomic uncertainties.
On the other hand, Emkay Global has adjusted its earnings forecasts for FY25–27, projecting a RoA of 1.9–2.1%, which is below historical averages due to ongoing asset quality concerns. Emkay Global has maintained a ‘Reduce’ rating on Bandhan Bank, with a target price of ₹175 per share, based on a 1x June-26E ABV valuation.
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