Bandhan Bank shares plummet over 6% after mixed Q3 results

Bandhan Bank in focus: Private lender Bandhan Bank’s shares fell as much as 6.21 per cent to Rs 202.80 on Monday, responding to its December quarter (Q3FY24) performance which garnered mixed reactions from investors.

Although the Kolkata-based lender saw healthy business growth, it reported a 7 per cent shortfall in profit after tax (PAT) at Rs 730 crore for Q3FY24, primarily due to muted other income, according to a report from Motilal Oswal.

While net interest income (NII) grew by 21.4 per cent annually in line with expectations, margins remained flat at 7.2 per cent. The bank’s other income plunged 47 per cent annually, contributing to a 1 per cent year-on-year (YoY) decrease in total revenue.

Despite adding 26 branches in the December quarter (Q3) and witnessing robust advances growth of 19.6 per cent YoY, the bank faced challenges with slippages and higher operating expenses (opex), resulting in a suppressed pre-provision operating profit (PPoP) growth.

The management commentary indicated the bank's ongoing efforts toward recovery, particularly concerning the Credit Guarantee Fund for Micro Units (CGFMU) audit. Management anticipates completion of the audit in the coming months and expects full recovery thereafter. However, challenges persist with the bank's cost-to-asset ratio expected to range between approximately 3.5 per cent-3.7 per cent going forward.

On the other hand, brokerage firm JM Financial's report stressed upon the bank’s healthy growth momentum, notably in its asset under management (AUM), which remained strong at 19.6 per cent annually. 

Despite steady operational performance and improvements in asset quality metrics, the bank faced challenges with slippages attributed to system migration.

Analysts believe in the bank's potential for recovery, supported by its continued investment in IT infrastructure and diversification strategy. However, concerns remain regarding delayed recovery from Credit Guarantee Fund for Micro Units (CGFMU) and emergency Credit Line Guarantee Scheme (ECLGS).

Considering these factors, brokerage firm Motilal Oswal maintains a ‘Neutral’ rating with a target price of Rs 245, while JM Financial suggests a ‘buy’ rating with a target price of Rs 340.

As of 10:36 am, shares of Bandhan Bank were trading nearly 5 per cent lower at Rs 205.50, according to BSE.