Buy Bandhan Bank; target of Rs 400: ICICI Direct

ICICI Direct's research report on Bandhan Bank

Bandhan Bank posted reasonable results with NII increasing 25.8% YoY and 6.2% QoQ to Rs 1923 crore, helped by 22.6% YoY growth in net advances. NIM for the quarter contracted ~20 bps YoY to 8.0% as a result of faster decline in yields that fell 30 bps QoQ to 13.3% compared to Cost of funds (CoF), which were down 20 bps QoQ to 6.2%. C/I ratio increased QoQ 15 bps to 29.4% on account of newer employee and branch addition along with increased business activity. PBT grew 6% YoY while net profit optically declines at 5.3% to Rs 920 crore, led by implementation of new tax regime in last year. Overall collection efficiency for the bank was at 92% in September 2020 in which collection efficiency for emerging enterprise business (micro banking) has improved to 89% for September 2020 and 91% in October 2020. Collection in housing segment has touched 98% level in September 2020.

Outlook

We upgrade from HOLD to BUY as stock price moderated from highs and valuations look reasonable now.