ICICI Direct's research report on Bandhan Bank
Bandhan Bank has posted decent results on the operating front however asset quality performance and outlook has raised some concerns that calls for cautious approach. With key states like Assam witnessing some stress due to Micro Finance bill the behaviour of customer profile in this region would be monitorable in coming months. Collection efficiency in the Emerging enterprise i.e. SME segment has declined from 94% in end of December to 92% by Mid-January, however the management has indicated that it would improve by March 2021. State of Assam witnessed steep decline in collection, down by 10% to 78% from December to Mid-Jan 2021. Head-line asset quality improved sequentially but which was a result of standstill asset classification norms, on a proforma basis the GNPA ratio showed a steep rise from 1.54% to 7.12% QoQ. ~95% of proforma slippages came in from the EEB segment. The proforma NPA includes part payments if not for that the NPA on that basis would have been ~3-3.5% which still is a meaningful rise. There has been no restructuring in loans and no write-offs as well
We thus downgrade our rating from BUY to HOLD with a revised PT of Rs370 (from Rs460 earlier) by valuing the bank at 2.7xFY23E ABV
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