Bandhan Bank dips 4%, hits over 6-month low on weak March quarter results

The stock was trading at its lowest level since October 30, 2020, having corrected 34 per cent from its 52-week high level of Rs 430.25

Shares of Bandhan Bank hit an over six-month low of Rs 285.90, down 4 per cent on the BSE in intra-day trade on Monday after the bank reported a weak set of numbers for the quarter ended March 2021 (Q4FY21), with high provisioning and interest reversals hurting profitability. The stock was trading at its lowest level since October 30, 2020. It has corrected 34 per cent from its 52-week high level of Rs 430.25 touched on December 11, 2020.

In Q4FY21, the profit after tax (PAT) of the lender fell to Rs 103 crore compared with Rs 517.3 crore in the same period last year. Sequentially, the net profit was down 84 per cent as in the December quarter it had recorded a profit of Rs 632.6 crore.

Net interest income (NII) of the microfinancing lender grew 4.6 year-on-year (YoY) to Rs 1,757 crore but sequentially it was down 15.2 per cent, owing to the fact that after the apex court's order it had to reverse interest to the tune of Rs 538 crore on account of non-performing asset (NPA) recognition and interest on interest.

Non-interest income, however, grew 57.4 per cent YoY and 42.3 per cent sequentially to Rs 787.3 crore in the same period, thereby taking the total income in the reporting quarter to 2,544 crore, up 17 per cent YoY but down 3 per cent sequentially. The net interest margin of the lender at the end of the March quarter stood at 6.8 per cent as opposed to above 8.3 per cent in Q3FY21 due to the interest reversal.

Asset quality on a proforma basis improved due to write-offs worth Rs 1,930 crore. Gross non-performing assets (GNPA) was at 6.81 per cent versus 7.12 per cent quarter-on-quarter (QoQ) (proforma). Loan growth was healthy at 22.5 per cent YoY while deposit growth was also strong at 36.6 per cent YoY. During the quarter, the bank has restructured accounts carrying a value of Rs 617 crore as of March 31, 2021, of the housing finance vertical comprising 0.71 per cent of the total portfolio.

“Bandhan reported Q4 profit of Rs 103 crore (-80 per cent YoY), a weak performance along expected lines, as it had to provide for stress from Covid and political issues in key states. We were disappointed by a higher slippage. While collection level of 98 per cent on non-NPLs would have implied limited risk in future, it faces credit risk from lockdowns, driving cuts of 13 per cent in FY22E profit and 11 per cent for FY23E,” analysts at Jefferies said in result update.

With collections on non-NPLs loans at 98 per cent and receding risk of political noise in key states of West Bengal and Assam, Bandhan was on track towards a fall in credit costs and recovery in profitability, the brokerage added. However, it believes Covid wave 2.0 may put this at risk and lead to higher credit costs in FY22 as well. As per the management, collection levels have already declined by 300-400 basis points (bps) and we may see a further impact over the next 1-2 months, Jefferies said.

At 09:39 am, the stock partially erased its early morning losses and traded 1 per cent lower at Rs 294.60 on the BSE, as compared to a 0.60 per cent rise in the S&P BSE Sensex.