Accumulate Bandhan Bank; target of Rs 198: Deven Choksey

Deven Choksey's research report on Bandhan Bank

Net Interest Income (NII) for Q1FY26 declined by 8.2% YoY (flat QoQ) to INR 27,572 Mn., below our estimates by 8.2%, mostly led by contraction in NIM margins. Noninterest income for Q1FY26 grew by 37.6% YoY (+3.8% QoQ) to INR 7,259 Mn., above our estimates, led by sharp increase in treasury gains. Annualized Net interest margin (NIM) for the quarter moderated to 6.4%, from 6.7% in Q4FY25, led by lower average yield on advances, attributed to a rising share of secured loans in the portfolio mix, a lower credit-deposit (CD) ratio, and the impact of the recent repo rate cut. Pre-Provision Operating Profits (PPoP) decreased by 14.0% YoY (+6.2% QoQ) to INR 16,684 Mn, higher than our estimates, led by lower operational expenses. The net profit declined by 65.0% YoY (+17.0% QoQ) to INR 3,720 Mn., below our estimates, led by decline in pre-provision operating profit and ~2x increase in provisions. The annualized credit cost moderated to 3.5% in Q1FY26 from 3.9% in Q4FY25, reflecting early signs of normalization in portfolio stress and disciplined provisioning practices.

Outlook

We have revised our FY26E/FY27E ABVPS estimates by -1.8%/-2.1%, respectively, factoring in elevated technical write-offs, persistent stress in the EEB portfolio, and anticipated near-term pressure on NIMs. We value Bandhan Bank at 1.1x Mar’27 ABVPS, implying a target price of INR 198.0 per share. We downgrade our rating from “BUY” to “ACCUMULATE” on the stock.

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