Even though Bandhan Bank Ltd. reported a more than two-fold increase in net profit for the third quarter, the lender's shares slumped more than 6% on Monday. The December 2023 quarter saw a 152% increase in net profit to Rs 733 crore, driven mostly by a rise in core income. In the same time last year, the bank with its headquarters in Kolkata declared a net profit of Rs 291 crore.
Nonetheless, the Bandhan Bank shares plummeted 6.5% to Rs 202.20 on the BSE, indicating a poor mood among investors.
While the majority of its rivals have seen a notable improvement in asset quality, Axis Securities stated that Bandhan Bank is still facing issues with asset quality, particularly in the Emerging Entrepreneurs Business (EEB) portfolio. The main cause of the stock's underperformance has been this.
The firm has reduced its earnings projections for FY24–25E by 8–11% in light of the improved asset quality and slower growth. Its rating for the banking stock has been raised.
"To arrive at a target price of Rs 240 per share, we value the stock at 1.5x Sep'25E ABV compared to current valuations of 1.4x Sep'25 ABV." We update our rating from HOLD to BUY because the target price suggests an 11% increase from the current market price,” according to Axis Securities.
An article in Business Line stating that the National Credit Guarantee Trustee Company (NCGTC) was now auditing loan claims the lender filed under the Credit Guarantee Fund for Micro Units (CGFMU) scheme is another reason for the collapse of the banking stock. The report also stated that the auditor is looking into loan window dressing, or evergreening.
Under the Union Ministry of Finance, the NCGTC is in charge of managing several credit guarantee trust funds. The audit includes loans totaling Rs 23,300 crore made under credit guarantee programmes. The entire loan amount consists of loans totaling Rs 2,500 crore under the government's Emergency Credit Line Guarantee Scheme (ECLGS) and Rs 20,800 crore under the Credit Guarantee Fund for Micro Units (CGMFU).
In the meantime, Bandhan Bank's market value dropped to Rs 32,717 crore on the BSE. Bandhan Bank's shares was down 6.08% at Rs 203.10 on the BSE at 12:18 p.m. In the afternoon session, the stock was one of the biggest losers on the BSE.
The large-cap stock dropped 17.53 percent in 2024 after losing 17% in a single year. The 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day, and 200 day moving averages are all being exceeded by the price of Bandhan Bank shares. 23.39 lakh shares of the lender were traded, translating into a BSE turnover of Rs 48.69 crore.
On June 1, 2023, the stock reached a 52-week high of Rs 272, and on March 28, 2023, it dropped to a 52-week low of Rs 182.20. With a target of Rs 216, Nuvama has kept its hold call on the banking stock. It has lowered its projected profitability for the lender.
The PAT for Bandhan was 15% below consensus because of more provisions and lesser other income. Even though SMA improved slightly, it was still high at 3.3% (4.2% QoQ), and the rapid increase in non-performing loans (NPLs) caused the EEB stress to rise by 9% QoQ. Although the value of EEB slippage decreased, the lag ratio increased from 7.4% to 7.5% QoQ. According to a vintage study, NPLs on loans granted in Q3FY23 - almost a year ago - touched 2.5% in Q3FY24, up from 0.6% QOQ," according to Nuvama.
"Management blamed the October 2023 dismal collections on the festivals and the CBS migration, which resulted in 45% of the Q3FY24 overall slippage (Rs 10bn) in October. We drastically reduced earnings and changed the target price from Rs 235 to Rs 230/1.5x BV 1Y ahead. Sustain HOLD," Nuvama continued.
Revenue increased to Rs 5,210 crore in Q3 from Rs 4,840.94 crore in the same period last year. In the most recent quarter, interest income increased to Rs 4,665 crore from Rs 3,808 crore in the third quarter of the previous fiscal year.
From Rs 2,080 crore during the same time last year to Rs 2,530 crore in Q3, net interest income increased. Regarding asset quality, gross non-performing assets (NPAs) decreased to 7% in Q3 from 7.2% at the end of the October–December quarter of the previous fiscal year. Nonetheless, net non-performing assets (NPAs) increased to 2.2% in Q3 from 1.9% in Q2 of the prior year. In FY23, provisions and contingencies decreased to Rs 684 crore from Rs 1,541 crore.
