Bandhan Bank extends gain post Q2 business update; soars 14% in 1 week

The bank reported 20 per cent year on year (YoY) credit growth at Rs 76,724 crore for the quarter ended September 2020 (Q2FY21)

Shares of Bandhan Bank were trading higher for the fifth straight day, up 4 per cent at Rs 327 on the BSE in intra-day trade on Thursday, after the lender reported strong credit growth at 20 per cent year on year (YoY) to Rs 76,724 crore for the quarter ended September 2020 (Q2FY21).

In the past one week, the stock of the private sector lender has rallied 14 per cent, as compared to 4.4 per cent rise in the S&P BSE Sensex. At 10:43 am, it was trading 3 per cent higher at Rs 324, as against 1.3 per cent gain in the benchmark index. A combined 8.4 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

Bandhan Bank's collection efficiency ratio touched 92 per cent as on September 2020, the bank said in a regulatory disclosure on Wednesday. Collection efficiency was the highest for mortgage and SMEs at 98 per cent, it said.

Deposit accretion also remained healthy at 34 per cent YoY to Rs 66,153 crore with CASA (current account-savings account) ratio at 38.2 per cent (up 530 bps YoY). Further, the lender said 94 per cent of microfinance customers paid in the month of September alone, which shows an increasing trend in repayment. 

"Bandhan Bank's collection efficiency in the microfinance institutions (MFI) portfolio recovered substantially to 89 per cent for Sep'20 v/s 70 per cent in the first week of Jul'20. This was achieved despite lockdown being imposed in certain states during the quarter. Management had earlier guided to reach collection efficiency of 90 per cent by 2QFY21. The bank has come close to this despite the odds. Furthermore, Bandhan highlighted 94 per cent of MFI customers made payments in Sep'20," Motilal Oswal Financial Services said in a note.

As economic activity continues to recover, the brokerage firm is seeing a steady improvement in collection trends. For the overall portfolio, it has improved to 92 per cent, which should keep asset quality /restructuring book under control. Furthermore, the bank holds Covid-19-related / excess standard provisions of Rs 1,770 crore to manage higher delinquencies over FY21. 

"Nevertheless, we estimate credit cost of 2.7 per cent for FY21, of which ~1.2 per cent has already been recorded in 1QFY21 (1.6 per cent in 4QFY20). We maintain a Buy rating, with unchanged taregt price of Rs 425 (3.2x FY22E BV)," it said.