Bandhan Bank rallies 6% as brokerages upgrade stock, see up to 27% upside

Bandhan Bank share price today: Bandhan Bank shares surged sharply on Friday after a string of brokerage upgrades lifted sentiment around the stock, with analysts flagging a gradual recovery in profitability and asset quality after a prolonged stress phase. 

 

The stock rose as much as 5.50 per cent intraday to ₹150.50, before paring some gains. At around 10:30 am, shares were trading 4.49 per cent higher at ₹149.05 on the BSE, outperforming the broader market as the Sensex was 0.15 per cent lower at 82,183.53.

 

The rally followed the lender’s December-quarter (Q3FY26) results and subsequent positive commentary from brokerages such as Motilal Oswal, JM Financial and Emkay Global, all of which upgraded their ratings citing improving operating metrics and reasonable valuations after years of de-rating.

 

 

Bandhan Bank reported a net profit of ₹210 crore for Q3FY26, up 84 per cent quarter-on-quarter (Q-o-Q), aided by better margins and higher other income, though profitability remained muted due to elevated credit costs and one-off expenses.

 

Operating performance shows early signs of revival

 

Motilal Oswal said the bank’s operating performance is “turning around”, supported by stabilising margins, improving asset quality and a gradual recovery in return ratios. Net interest income (NII) rose 4 per cent Q-o-Q to ₹2,690 crore, while net interest margin improved by 6 basis points sequentially to 5.9 per cent, aided by a 20-basis-point decline in cost of funds.

 

Asset quality indicators also improved, with the gross non-performing asset (GNPA) ratio declining sharply by 169 basis points (bps) Q-o-Q to 3.33 per cent, and net NPA falling to 0.99 per cent, largely helped by the sale of bad loans to asset reconstruction companies. Despite this, the bank maintained a healthy provision coverage ratio of around 71 per cent by shoring up provisions.

 

Motilal Oswal upgraded the stock to ‘Buy’ with an unchanged target price of ₹175, implying an upside of about 23 per cent. The brokerage expects Bandhan Bank’s return on assets (RoA) to recover to 1.3-1.5 per cent over FY27-28, compared with an estimated 0.6 per cent in FY26, as asset quality normalises and margins stabilise. It noted that valuations, after nearly five years of de-rating, now appear reasonable.

 

 

Credit costs remain key monitorable

 

JM Financial, while acknowledging the strong operating performance, highlighted that net profit was about 10 per cent below its estimates due to higher-than-expected credit costs of around 3.4 per cent during the quarter. This was despite expectations that credit costs would moderate following the NPA sale.

 

The brokerage noted that improvements in slippages and SMA (special mention accounts) were gradual, especially when compared with other microfinance-focused lenders. Management, however, reiterated its guidance of exiting FY27 with credit costs of 1.6-1.7 per cent and loan growth of 15-17 per cent over the next two to three years.

 

JM Financial upgraded the stock to ‘Add’ from ‘Hold,’ with a revised target price of ₹160, valuing the bank at 0.8 times FY28 book value. It expects average RoA and RoE of about 1.2 per cent and 11 per cent, respectively, over FY27-28, and said downside risks appear limited at the current valuation of around 0.7 times FY28 price-to-book.

 

 

Valuations attractive despite near-term pain

 

Emkay Global, too, upgraded Bandhan Bank to ‘Buy’ from ‘Add,’ citing inexpensive valuations and the potential for medium-term recovery, even as near-term challenges persist. The brokerage pointed out that credit costs remain elevated as the bank continues to rebuild provision buffers after the ARC sale, while higher employee-related expenses, including a ₹120 crore labour code impact, weighed on profitability in the quarter.

 

Emkay cut its FY26 earnings estimates by 20 per cent and expects a subdued RoA of 0.6 per cent for the year. However, it sees a meaningful improvement from FY27 onwards, with RoA rising to 1.2 per cent in FY27 and 1.6 per cent in FY28 as growth picks up and asset quality improves. The brokerage set a target price of ₹180, valuing the stock at 1 time December 2027 adjusted book value.

 

While brokerages remain watchful of microfinance collections in West Bengal and Assam, particularly ahead of elections, the consensus view is that the risk-reward balance has turned favourable, driving Friday’s sharp rally in the stock.   

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