Private sector lender Bandhan Bank reported strong profitability and NII growth in December quarter, but the report card had some red flags amid a sharp rise in NPA and the cost to income ratio along with lower NIM QoQ.
The bank registered a whopping 136.6 percent YoY growth in profit and 37 percent rise in net interest income, but sequentially net interest margin contracted to 7.9 percent (at all-time low) against 8.2 percent and gross non-performing assets rose 20bps to 1.96 percent QoQ.
Bandhan made additional provision of Rs 200 crore for MFI book in Assam which forms 10 percent of total loan book.
Here are key highlights from Bandhan Bank's conference call by Narnolia Financial Advisors:
On additional provisions of Rs 200 crore made on the standard advance in microfinance portfolio of Assam, management said they were made as the OTR movement had fallen in Assam in December beginning but they have improved near the quarter end.
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The management said that considering the current situation there should be no need of accelerated provisioning during Q4FY20.
On GNPA movement in Gruh's portfolio, management said there were slippages of around Rs 82 crore, out of which, 50 percent were due to the classification change. Till last quarter asset classification was done on the basis of the NHB norms but post-merger it is done as per banking regulation.
30 DPD+ Portfolio as of QQFY20 is Rs 556 crore versus Rs 384 crore in Q2FY20 increase of Rs 172 crore, out of which Rs 162 crore increase is from Assam.
As per the management, they have not seen any concern on microfinance business in Bengal which has been suggested in various reports.
The total deposits from Assam is Rs 1,474 crore. The average balance per DSC customer is Rs 1,900.
Bank has benchmarked the event in the north against GST and demonetisation where the bank has the experience that things come back to normal in 3 months time.
The management said the Gruh portfolio growth was affected on account of the integration of merger and expects to get into normal trajectory in 3 to 6 months.
The growth outside east India in terms of customer acquisition is faster as compared to eastern India.
The increase in opex was partly on account of the increase in employees and increase in advertisement expense after merger to add to that as the Gruh high-cost borrowings which were on INDIAN as were replaced, the processing fees paid on loan was amortised over the period of loan and now that it has repaid borrowing uncharged processing fee can not be carried.
On Reduction of NIM during the quarter Management said one of the reasons was excess liquidity and as they pay balance Gruh borrowings, the excess liquidity will come down and secondly the due change in recognition of Gruh NPA there has been some reversal of Interest income. Management expects NIM to go back to 8 percent in 1 or 2 Quarter.
Numbers of exclusive borrowers are in the range of 55 percent.
The Numbers of micro borrowers in West Bengal would be around 45 percent.
The total number of customers in Assam in micro banking would be 14.2 lakhs.
The loan portfolio in the state of Bihar is Rs 4,053 crore versus Rs 3,120 crore last year while Orissa is Rs 945 crore versus Rs 659 crore last year.
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