Bandhan Bank: Repeated earnings miss, rising MFI slippages to halt stock recovery

The recent rally in Bandhan Bank shares, which saw its shares recovering 29 per cent from February 18 low of Rs 128.15 apiece, could be under threat, as rising MFI slippages, slowdown in business growth momentum and repeated earnings miss left little room for further upside on the counter, said banking analysts. 

Bandhan Bank’s Q4FY25 results were below the Street estimates across parameters. Nirmal Bang said NII came in 6.8 per cent below its estimates, pre-provision operating profit (PPOP) 13.7 per cent and profit after tax 18.1 per cent. This was mainly on account of slowdown in growth, margin compression, lower other income, and higher opex. 

This brokerage believes the Bandhan Bank stock will see an overhang in the near-to-medium term, as the bank is shifting towards lower yielding secured loan segments, which means margin will be under pressure. 
Higher C/D ratio at 87.3 per cent can constrain growth unless deposit growth picks up, it said while suggesting 'Hold' and a target of Rs 165 on the stock. 

Bandhan Bank shares are up 29.26 per cent from February 18 low of Rs 128.15. The stock last traded at Rs 165.65. This is against a few analyst targets of Rs 160-170 levels.

MOFSL said Bandhan's Q3 margin contracted significantly and provisions remained elevated. Loan growth was suppressed as MFI book declined with the segment mix reducing to 41 per cent. 

"The reduction in repo rate and the mix of unsecured/MFI loans will affect margins. Deposit growth was higher than advances growth, though CASA ratio moderated further. Asset quality deteriorated as slippages continued to rise by 72 per cent YoY amid rise in stress in MFI book," it said. 

This brokerage cut its earnings estimates by 10 per cent and 7 per cent for FY26/FY27 and expects the company to report RoA and RoE of 1.7 per cent and 14.3 per cent, respectively, in FY27. It suggested 'Neutral' with a target price of Rs 170.
 
"Given secured loans are likely to grow faster than EEB loans, normalised NIM would be lower. With repeated miss on earnings and elevated credit cost we maintain HOLD. We retain target of Rs 160 /0.9x BV. The CEO guides to steady state credit cost of 1.6 per cent from 4 per cent in Q4.