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Bandhan Bank share price sinks on Assam flood worries

Due to the flood situation in the Northeast and growing NPAs, the decline in the stock was expected, say analysts

June 28, 2022 / 04:09 PM IST

Bandhan Bank share price slipped to a low of Rs 263.40 on June 28, down more than 6 percent from its previous close, on fears that the floods in Assam and neighbouring areas could impact the operation of the company in the region, analysts said.

The Kolkata-headquartered lender has a large focus on the eastern parts of the country.

“In most of the cases, loans disbursed by the banks in the northeast region affected by floods are non-collateral loans, thus with flood hitting the region, there is growing employment crisis leading to rise in non-performing assets (NPAs),” IIFL Securities analyst Sanjiv Bhasin said.

According to analysts, some of the bank’s portfolio has gone bad already, hence the negative reaction from the market. Alongside, as evident from previous trends, whenever the market falls, the reaction is predominantly more for Bandhan Bank but it recovers fast as well, they said.

They added that despite the fall, the bank is not performing too badly but the bad debt is a worry.

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“Their latest net NPA stands at more than Rs 1,564 crore and its net NPA at 1.66 percent. If compare with pre-pandemic period, net NPA was around Rs 228 crore and in percentage term it was just 0.58 per cent,” said G Chokkalingam, analyst and MD, Equinomics.

He added that other private banks like HDFC Bank improved the quality of their assets by reducing net NPA as low as 0.32 percent.

“However Bandan Bank trades at 2.7 times price to adjusted book value which is close to HDFC Bank which trades around 3.2 times,” said Chokkalingam.  Alongside, falling growth over the year has also contributed significantly to the share’s slide. “The bank used to have double-digit growth, but now the growth has also sunk very badly. Considering the growth and quality of assets, it is still overpriced,” he added.

Analysts said that the bank is likely to soon initiate provisioning to address the issue, as the profit book is expanding and the bank is likely to take measures to convert non-collateral loans to collateral loans.

The stock recovered some of the lost ground and ended the day at Rs 276.25, down 2.6 percent on the National Stock Exchange.
Pushpita Dey
first published: Jun 28, 2022 03:55 pm
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