Bandhan Bank posts Rs 275-cr net profit

Bank's gross NPA stood at 0.15%, while net NPA stood at 0.08% at the end of 31 March 2016

Even as the profits of most banks take a plunge, newly-opened Bandhan Bank reported a net profit of Rs 275.25 crore for nearly seven months period between August 2015-March 2016. However, Bandhan's profitability is of little surprise, as so far the bank has remained mostly a micro-lender, shying away from large-scale retail and corporate loans.

Effectively Bandhan's non-performing assets are enviable to any bank. The bank's gross NPA stood at 0.15%, while net non-performing assets stood at 0.08% at the end of 31 March 2016.

For the last financial year, Bandhan, as a microfinance institution, had posted a net profit of Rs 315 crore for the whole year.

 

Notably, of the gross advances of Rs 15,493.97 crore, the share of retail advances was a meagre Rs 156 crore, mostly in home and auto loan segments. On the non-micro-lending portfolio, the share of corporate credit is limited to Rs 30 crore, mostly to other microfinance institutions. In future too, Bandhan will remain cautious in corporate lending, said C S Ghosh, managing director and chief executive officer, Bandhan.

Further, the bank has been able to reduce its cost of funds after converting into a bank. Bandhan's cost of fund has come down from around 10% before conversion into a bank to 8% at present, as the bank has been able to garner deposits which had been cheaper from its earlier bank loans, said Ghosh.

So far, the bank has been able to mobilize Rs 12,088.75 crore as deposits. Of this, nearly 21.55% or about Rs 2,605.59 crore are current account and savings account (CASA) deposits, with interest rate relatively lower than fixed deposits. This apart, while on the lending side, corporate firms account for negligible loans, about one-third of Bandhan's deposits are from corporate entities.

Notably, Bandhan is offering 6% interest rate on savings account deposit of above Rs 1 lakh. On fixed deposits, the bank is offering 8.25% interest rates on deposits for one to less than three years maturity, one of the highest interest rates in the banking sector.

In addition, as a major portfolio of the bank remains microcredit, the net interest margin of the bank is quite high at around 9%, against 2-4% for most other banks. At present, the bank's lending rate in the microcredit portfolio is about 20.5%, while the average cost of deposits is about 8%.

At present, Bandhan's net worth is around Rs 3,334.50 crore and some of its public shareholders include International Finance Corporation (IFC), Small Industries Development Bank of India (SIDBI), and an arm of GIC, the sovereign wealth fund of Singapore. The bank will go for an initial public offer (IPO) in 2018. According to Ghosh, the bank would not go for any shareholding restructuring prior to the IPO.

This financial year, Bandhan is looking at an average credit and deposit growth of around 30%.

"Last financial year, even though we were on a transforming phase, we saw 67% growth in credit. This year we expect to have 30% growth in business," said Ghosh.

This apart, Bandhan is also experimenting with new formats in branch expansion. For example, the bank recently rolled out small format branches of each nearly 500-600 square feet, employing about three staffs, to serve the basic banking needs of people in semi-urban and rural areas.