Bandhan Bank Q2 profit dips 5% as Covid-19 provisions eat into bottomline

Bandhan Bank on Monday reported 5 per cent decline in September quarter net profit at Rs 920 crore on a spike in provisions made for possible loan losses due to the COVID-19 pandemic.

The microlender-turned-universal bank also announced plans to get into the retail lending segment, to sell gold loans, consumption loans for white goods, vehicle loans and unsecured personal loans majorly eyeing the business which can get generated from its rural focus.

The bank's core net interest income moved up 25 per cent to Rs 1,920 crore on a 19.4 per cent growth in total advances and despite a 0.20 per cent decline in net interest margin (NIM).

In line with other lenders, the bank said a high quantum of liquidity impacted the margins as the deposit growth was at nearly 16 per cent. It hopes for a revival on the advances side in the second half which will improve margins.

The non-interest income improved 6.11 per cent to Rs 382 crore.

From an asset quality perspective, the gross non-performing assets (NPAs) ratio declined 1.2 per cent of the overall book as against 1.8 per cent in the year-ago period, and would have been at 1.5 per cent if not for the Supreme Court mandate on non-classification of certain loan accounts as dud.

Total Advances grew 19.4 per cent to Rs 76,614.6 crore as on September 30, 2020. Total deposits increased 34.4 per cent to Rs 66,127.7 crore.

Managing Director and Chief Executive C S Ghosh told reporters that the bank is carrying nearly Rs 2,100 crore or 2.8 per cent of book in excess provisions after setting aside an additional Rs 300 crore as COVID-19 provisions in the quarter.

Chief Financial Officer Sunil Samdani said there will not be any material increase in the provisions in the next few quarters as the bank is already carrying over 2.8 per cent of excess provisions.

The bank is not focusing on the loan restructuring right now and instead focusing on upping the collection efficiencies, Samdani said, conceding that it may have to eventually admit some recast requests.

Ghosh said the micro-loans collections have touched 92 per cent in September and the same for the emerging entrepreneurs segment touched 91 per cent in October, and added that the focus in the next few months will be on taking it to the normal rate of over 98 per cent.

"We expect to reach that level within 90 days," he added.

He said the focus on the retail loans segment will not further affect the net interest margins, which have declined to 8 per cent from the ten per cent levels a few years ago, and it is confident of conserving money from its efficiency initiatives to take care of the impact.

Ghosh said lifestyles in rural areas are changing, and the same borrowers which it serves are also interested in loans for buying two-wheelers or for their washing machines and added that the bank will stay relevant to its core segment through the initiative.

The bank, which has over 4,700 banking outlets, will add another 574 outlets by the end of the fiscal in March and a bulk of the new additions will be outside of its stronghold of eastern India, Ghosh said.

Samdani said this move will not hurt the cost to income ratio because a 12-15 per cent addition in the network is always accounted for and added that a fourth of those will be new branches, while the rest will be the smaller outlets.

The bank's overall capital adequacy stood at 25.68 per cent as of September 30, 2020.

The bank scrip closed 4.01 per cent up at Rs 300.85 on the BSE on Monday, as against gains of 0.36 per cent on the benchmark.