Bandhan Bank slips 6% on business update post Cyclone Amphan

The bank said Cyclone Amphan is likely to impact business worth Rs 260 crore.

Shares of Bandhan Bank slipped 6.5 per cent to Rs 197 on the BSE on Friday after the private sector lender said its services have been impacted in some areas of West Bengal and Odisha due to Amphan and the cyclone is likely to impact business worth Rs 260 crore. The stock has fallen 11 per cent in the past two trading days, as compared to a 0.4 per cent rise in the S&P BSE Sensex.

Cyclone Amphan struck five districts in southern West Bengal and northern coastal Odisha starting in the afternoon of May 20 and lasting till the wee hours of the morning of May 21.

“As per the initial assessment, in our areas of operations, 49 banking units (micro banking outlet) in five districts were impacted of which 45 are operational today,” the Kolkata-headquartered Bandhan Bank said in a regulatory filing on Tuesday after market hours.

The bank further said, it could continue operations in all but five branches in the affected districts. Where the outlets could not continue services, it was due to issues in accessibility. The bank expects these outlets to resume operations shortly.

As per Bank’s estimate, the business of around 65,000 of its micro banking borrowers, amounting to an exposure of approximately Rs 260 crore, could be impacted due to the cyclone. The major impact has been in the district of South 24 Parganas.

In our experience of Fani, the cyclone that caused large scale damage in Odisha in May 2019, the impacted portfolio took 3 to 6 months to achieve normalcy, aided by the committed workforce and customer loyalty. On the back of this experience, we expect the Amphan affected portfolio to regularise by Q3 of FY21, it added.

Bandhan has a strong brand presence, and competitive advantage of reach and local knowledge in East and North-East India in the micro loan business, which constituted around 60 per cent of its loan portfolio. The bank's significant presence in these regions exposes it to geographical concentration risk, inherent to the segment. As of December 31, 2019, about 40 per cent of Bandhan's microfinance borrower base, which is the largest loan portfolio, was in West Bengal alone. The top three states (including Assam and Bihar) constitute nearly 65 per cent of its micro loan book, CRISIL said in a rating rationale.

At 09:45 am, Bandhan Bank was trading 2 per cent lower at Rs 206 on the BSE, against a marginal 0.01 per cent rise in the S&P BSE Sensex. A combined 6.5 million equity shares changed hands on the counter on the NSE and BSE so far.