Bandhan Bank dips 7% on disappointing September quarter results

Shares of Bandhan Bank dipped 7 per cent to Rs 272.55 on the BSE in Monday’s intra-day trade after the bank reported net loss of Rs 3,009 crore in the second quarter ended September 2021 (Q2FY22) on huge provisions of over Rs 4,600 crore for the bad loans and restructured advances. It had posted a net profit of Rs 920 crore in Q2FY21. The stock of private sector lender is trading close to its 52-week low of Rs 259.40 touched on August 25, 2021.

During the quarter, the bank has made accelerated provision on non-performing assets (NPA) accounts of Rs 1,500 crore resulting in PCR of 74 per cent as against 62 per cent in Q1FY22. In addition to this the bank has also provided additional standard assets provision amounting to Rs 2,100 crore and provision on restructured assets amounting to Rs 1,030 crore amounting to total of Rs 4,630 crore, Bandhan Bank said in a statement.

Its gross non-performing assets rose to 10.8 per cent in Q2FY22 from 1.2 per cent a year ago and 8.2 per cent in June 2021. The net NPAs were up at 3.0 per cent from 0.36 per cent a year ago. However, they declined marginally from 3.29 per cent in June 2021.

The bank’s net interest income (NII) for the quarter grew by just 0.6 per cent to Rs 1,935 crore from Rs 1,923 crore in Q2FY21. Sequentially, NII was down by 8.5 per cent from Rs 2,114 crore in Q1FY21.

Bandhan Bank delivered a disappointing performance in Q2FY22 due to elevated provisions (increase of 4x QoQ), as the bank accelerated provisions for its existing NPA accounts, restructured advances, and shored up its contingent provisioning buffer which resulted in heavy losses, Motilal Oswal Securities said.

On the business front, AUM growth was weak while deposits trend remained healthy, led by a continued focus on retail deposits. Asset quality challenges continued to widen further, led by elevated slippages, increase in restructured book, and Special Mention Account (SMA) overdue in the Microfinance institutions (MFI) portfolio remaining higher. Collection efficiency in the Assam region was lower at 82 per cent in September 2021, the brokerage firm said.

Overall, the brokerage firm said it still remain cautious and uncertain about Bandhan Bank’s asset quality, and hence, estimate its credit cost to remain elevated at 11 per cent of loans for FY22 and at 3.5 per cent of loans for FY23E. We now estimate a loss of Rs 1,600 crore for FY22 and cut our earnings estimate for FY23 by 14 per cent, it added.

ICICI Securities believes with steep rise in stress and uncertainty relating to recovery would remain an overhang on the stock and performance in key eastern states would be monitored.

At 10:02 am; Bandhan Bank was trading 5 per cent lower at Rs 276 on the BSE, as compared to 0.80 per cent rise in the S&P BSE Sensex. A combined 13.5 million equity shares were changing hands on the counter on the NSE and BSE.

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