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What should investors do with Bandhan Bank after Q4 results: buy, sell or hold?

The private lender reported an 80.1 percent year-on-year decline in profit at Rs 103 crore in March 2021 quarter. Profit in the year-ago quarter was at Rs 517.3 crore.

May 10, 2021 / 09:47 AM IST
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The Bandhan Bank share price fell 4 percent in morning trade on May 10 after the private lender reported a steep 80.1 percent year-on-year decline in profit at Rs 103 crore in March 2021 quarter. Profit in the year-ago quarter was at Rs 517.3 crore.

The bank's net interest income (NII), the difference between interest earned and interest expended, grew by 4.6 percent year on year to Rs 1,757 crore, with loan portfolio (on book + off book+ TLTRO) growth at 21.2 percent and deposits growth at 36.6 percent YoY, the lender said on May 8 while sharing Q4 numbers.

Also Read: Bandhan Bank Q4 profit falls 80.1% to Rs 103 crore as provisions spike

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

ICICI Direct | Rating: Hold | Target: Rs 330


Microcredit at 67 percent of the loan book and lower-than-expected recoveries due to the second coronavirus wave have further raised caution towards the bank. With the loan portfolio in key states like West Bengal and Assam facing challenges due to multiple reasons and clarity on law change awaited, the near-term outlook on overall asset quality is uncertain. The management has indicated that they plan to build provisions buffers irrespective of the external environment, which could keep credit cost elevated.

Motilal Oswal | Rating: Neutral | Target: Rs 335

Bandhan reported a weak performance, affected by elevated provisions and higher interest reversal. We expect asset quality trends to remain under pressure thus, we estimate credit cost at 4 percent of loans for FY22. We cut our earnings estimate by ~11 percent/6 percent for FY22/FY23.

Jefferies | Rating: Buy | Target: Cut to Rs 400 from Rs 470

The higher NPLs and risks from the second COVID wave drive earnings cut. Disappointed by higher slippages, while bank faces credit risks from lockdowns. Jefferies has cut earnings estimates by 13 percent for FY22 and 11 percent for FY23.

ICICI Securities | Rating: Buy | Target: Cut to Rs 465 from Rs 501

The portfolio vulnerability comes to the fore, while asset quality toll in Assam and West Bengal marred Q4 earnings. The bank’s contingency buffer utilised in Q4FY21, however, the bank didn’t pull back on growth despite a challenging year on asset quality.

ICICI Securities has revised credit cost estimate to 3.4 percent/2.0 percent. The higher growth than our liking poses incremental risks that can weigh on FY22. Earnings estimates have been cut by 23 percent for FY22 and 6 percent for FY23.

CLSA | Rating: Downgrade to underperform from outperform | Target: Cut to Rs 300

The bank’s Q4FY21 performance was weak due to high provisions. The near-term uncertainty, especially with the second COVID wave remains high. CLSA cut its estimates further by 10-33 percent. ICICI Bank, Axis Bank and SBI remain preferred picks.

Credit Suisse | Rating: Neutral | Target: cut to Rs 330 from Rs 360

It posted strong growth even in impacted states, while uncertainty remains. The overdue and credit costs are likely to remain elevated. Credit Suisse has cut the EPS estimate by 7 percent.

Kotak Institutional Equities | Rating: Add | Target: Cut to Rs 350 from Rs 375

The company reported 80 percent YoY decline in earnings despite 15 percent YoY operating profit growth. The situation on early delinquent buckets showed improvement. However, the intensity of the impact of the second wave on earnings may be lower.

JPMorgan | Rating: Overweight | Target: Rs 400

The accelerated provisioning drives a miss, while collections show broad-based improvement. The company believes back book provisioning is largely done and expects better performance in FY22. The 13 percent FY21 ROE with >20 percent loan growth despite challenging conditions.

At 0928 hours, Bandhan Bank was quoting at Rs 289.15, down Rs 7.85, or 2.64 percent, on the BSE.

The share touched a 52-week high of Rs 430.25 on December 11, 2020 and a 52-week low of Rs 195.40 on May 22, 2020. It is trading 32.79 percent below its 52-week high and 47.98 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: May 10, 2021 09:47 am

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