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Brokerages see up to 49% upside in Bandhan Bank despite decline in Q1 profit

Goldman Sachs maintained a buy rating, but removed the stock from its conviction list. Here's why

August 02, 2021 / 10:04 AM IST
File image of a Bandhan Bank branch

File image of a Bandhan Bank branch

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Bandhan Bank share price gained over 2 percent in the morning session on August 2 after the bank declared its June quarter results.

Bandhan Bank on July 30 reported 32 percent decline in net profit at Rs 373.10 crore for June quarter 2021-22 as provisions for bad loans spiked. The bank had posted a net profit of Rs 549.80 crore in the same quarter a year ago.

Total income however was up 20.4 percent at Rs 2,647.50 crore in the quarter as against Rs 2,198.30 crore in the year-ago period, the bank said in a regulatory filing.

Also read: Bandhan Bank Q1 profit falls 32% at Rs 373 crore; NPA see a sharp spike

Bank's gross non-performing assets (NPAs) spiked to 8.2 percent of gross advances as of June 30, 2021 from 1.4 percent by June 2020. Net NPAs (or bad loans) also jumped to 3.3 percent from 0.5 percent.


Provisions for bad loans and contingencies rose to Rs 1,374.87 crore in the quarter from Rs 849.06 crore parked aside in the year-ago period.

The stock was trading at Rs 299.20, up Rs 7.90, or 2.71 percent. It has touched an intraday high of Rs 303.45 and an intraday low of Rs 292.50.

Here is what brokerages have to say about the stock and the company after Q1 earnings:

CLSA | Rating: Underperform | Target: Rs 300

Govt package in Assam restricts the asset quality downside. It will likely prevent a bad-case scenario from playing out. Bengal MFI stress remains high. Overall, restructuring and ECLGS remain high and does not point to a quick normalisation.

Goldman Sachs | Rating: Buy | Target: Rs 447

The bank reported an operationally strong quarter with PPoP 4% ahead of estimates. Growth and most importantly, asset quality were majorly impacted due to strict local lockdowns. The brokerage maintained a buy rating, but removed the stock from its conviction list. Near-term macro uncertainty can weigh on the stock outperformance.

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JP Morgan | Rating: Overweight | Target: Rs 390

Asset quality shows an increase in stress, the brokerage expects it to bottom out by September. It estimates net provision charge of 6.2% based on restructured Book and SMA 1/2 Pool.

Kotak Institutional Equities: Rating: Add | Target: Rs 335

The bank reported a 32% YoY earnings decline primarily due to high provisions. Impaired ratios are currently high with gross NPL at 8%. The bank is likely to see an improvement in H2 as the economic situation improves.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Aug 2, 2021 10:04 am

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