A strong set of June quarter results lifted Bandhan Bank Ltd shares by 10 per cent in Monday’s trade. Analysts upped their earnings projections for FY25 and FY26 to 7-12 per cent but their revised price targets on the stock suggest the positives are already in the price.
Bandhan Bank reported a steady quarter with the earnings beat propelled by controlled opex and provisions. Net interest income (NII) growth was healthy, aided by stable margins. The deposit growth was modest but the management expects deposits to grow faster than advances.
“Asset quality deteriorated slightly; however, slippages moderated, while CE remained steady at 99 per cent. Moreover, the bank, on a conservative basis, has increased the risk weights in the EEB book. The management expects a positive outcome from the ongoing CGFMU audit, which is to be completed shortly. We raise our earnings estimates for FY25/26 by 10 per cent/11 per cent and expect an FY26E RoA/RoE of 2.2 per cent/ 18.9 per cent,” MOFSL said.
This brokerage suggested a ‘Neutral’ rating on Bandhan Bank with a revised target price of Rs 220 apiece.
The stock climbed 9.63 per cent to hit a high of Rs 211 on BSE.
Axis Securities raised its FY25 and FY26 PAT estimates by 9 per cent and 7 per cent, respectively, building in higher growth and lower credit cost. The brokerage raised its target price on Bandhan Bank to Rs 195 while maintaining a ‘Reduce’ call on the stock.
Nuvama said the 48 per cent YoY surge in profit on a low base beat consensus estimate by 35 per cent.
“That said, the bank took a hit of 362bp on CAR as it increased risk weights on EEB loans from 75 per cent to 125 per cent based on its conservative reading of the RBI’s November risk-weight circular. Given the lower capital, we retain the target price at Rs 200 and ‘HOLD’. Feedback from other MFI lenders suggests they do not need to mark down capital. The CEO guided for stable-to-declining slippages,” Nuvama said.
Arihant Capital Markets suggested a target price of Rs 228. Nirmal Bang said the banking stock will see an overhang in the near to medium term ahead of the result of the detailed audit on the directions of NCGTC. How the succession at the top management level takes shape would be keenly watched it said.
“Frequent IBPC transactions in the Housing portfolio can be a concern in the long term with respect to the quality of the book being originated and. Higher C/D ratio at 94.3 per cent can constrain growth, but the same can be managed by tapping the refinancing route,” it said while suggesting a target of Rs 217 on the counter.
