Last updated: 02 Nov, 2021 | 08:18 am
Bank reported losses: Bandhan Bank posted a net loss of Rs 3008.6 crore in the quarter ended September. Last year in the same quarter, the bank reported a net profit of Rs 920 crore. The losses were higher as provisions for the quarter stood at Rs 5,578 crore compared with Rs 380 crore a year ago.
Net interest income: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income (NII) for the bank rose 0.6% on year to Rs 1,935 crore compared with Rs 1,923 crore in the year-ago quarter. Sequentially, NII was down by 8.5% from Rs 2,114 crore. Other income rose 34% to the preceding year to Rs 492 crore.
Asset quality worsened - The bank asset quality worsened from the previous quarter. The bank reported gross NPA ratio stood at 10.82% compared to 8.18% in the last quarter. Gross NPA in the same quarter last year stood at 1.2%. Net NPA reported by the bank is 3.04% compared to 3.29% in the last quarter and 0.36% from a year ago.
Provisions - Bandhan bank made accelerated NPA provisions of Rs 1,500 crore resulting in a provision coverage ratio of 74% against 62% as of last quarter. The total provision for the second quarter stood at Rs 5,578 crore compared with Rs 380 crore a year ago.
Deposits and Advances: Deposits grew 24% on-year to Rs 81,898 crore. Total advances rose 6.6% on-year to Rs 81,661 crore as against Rs 76,614.6 crore as on September 30, 2020.
Bandhan Bank Q2 results review:
Bandhan bank has reported a lacklustre set of numbers for the quarter ended Sep as the losses widened. Asset quality challenges continued to widen further, led by elevated slippages, increase in restructured book, and Special Mention Account (SMA) overdue in the Microfinance institutions (MFI) portfolio remaining higher. The AUM growth was although the total deposits witnessed healthy growth.
However, the bank has recognised the stress pool and proactively taken additional requisite provisions such as to meet any contingency requirements. This has resulted in a loss for the quarter. During the quarter, the bank has seen a substantial recovery in collections as the second wave of Covid subsided.
Brokerage View: Overall, the brokerage firms still remain cautious and uncertain about Bandhan Bank’s asset quality, and hence, estimate its credit cost to remain elevated at 11% of loans for FY22. They now estimate a loss of Rs 1,600 crore for FY22 and cut their earnings estimate for FY23 by 14%. ICICI Securities believes with a steep rise in stress and uncertainty relating to recovery would remain an overhang on the stock. The bank's performance in key eastern states would be monitored as collection efficiency in the Assam region was lower at 82% in September 2021. Goldman Sachs maintained a buy rating with the target price of Rs 412 and Brenstein maintained outperform rating with target price of Rs 420.