A good set of June quarter earnings boosted Bandhan Bank Ltd's shares by 10% in Monday trading. Analysts raised their profit expectations for FY25 and FY26 to 7-12%, but their updated stock price predictions indicate that the benefits are fully priced in.
Bandhan Bank reported a consistent quarter, with profit beats driven by managed opex and provisions. Net interest income (NII) growth was strong, helped by steady margins. The deposit increase was modest, but management expects deposits to outpace advances.
"Asset quality dropped marginally; nonetheless, slippages decreased, and CE stayed at 99 percent. Furthermore, the bank has conservatively increased the risk weights in the EEB book. The management expects a good conclusion from the ongoing CGFMU audit, which will be finished soon. We revise our profit expectations for FY25/26 by 10%/11% and anticipate an FY26E RoA/RoE of 2.2%/18.9%," MOFSL stated.
This brokerage recommended a 'Neutral' rating for Bandhan Bank, with a reduced target price of Rs 220 per. The stock rose 9.63 percent to a high of Rs 211 on the BSE.
Axis Securities increased its FY25 and FY26 PAT projections by 9% and 7%, respectively, investing in better growth and reduced financing costs. The firm increased its target price for Bandhan Bank to Rs 195 while keeping a 'Reduce' rating on the company.
Nuvama claimed the 48% YoY increase in earnings on a low base outperformed the average projection by 35%.
"That said, the bank incurred a 362bp impact on CAR when it boosted risk weights on EEB loans from 75% to 125% based on its cautious interpretation of the RBI's November risk-weight circular. Given the lesser capital, we maintain the target price of Rs 200 and 'HOLD'. Other MFI lenders' feedback shows that capital should not be marked down. The CEO predicted stable-to-declining slippages," Nuvama stated.
Arihant Capital Markets has indicated a target price of Rs 228. Nirmal Bang stated that the banking stock will have an overhang in the near to medium term as a result of the comprehensive audit on NCGTC's directives. It said that the succession at the highest management level will be closely monitored.
"Frequent IBPC transactions in the Housing portfolio might be a source of worry in the long run regarding the quality of the book being created. A higher C/D ratio of 94.3% can limit growth, but this can be mitigated by using the refinancing option," it added, recommending a target price of Rs 217 on the counter.
