Bandhan Bank Q1 profit drops 32% as provisions for bad loan rise

Bandhan Bank on Friday reported 32 per cent decline in June quarter net profit at Rs 373.08 crore as the second wave of the pandemic hit collections in its core microlending segment, impacting asset quality and multiplying provisions.

The Kolkata-based lender said gross slippages in the quarter stood at Rs 1,661 crore as against Rs 3,500 crore on a pro-forma basis in the preceding March quarter, which took the gross non performing assets ratio to 8.18 per cent as against 1.43 per cent in the year-ago period and quarter-ago's 6.81 per cent.

Managing Director and CEO C S Ghosh said loan collections were hit massively because of the second wave of the pandemic and exuded confidence that things will improve as the pandemic-related impact recedes.

Chief Financial Officer Sunil Samdani said collection efficiencies in the quarter were better than the 60 per cent experienced because of the nationwide lockdown in April-June 2020-21 but added that they went up to 95 per cent in March quarter as the lockdowns eased, expecting similar experience in 2021-22 as well.

He explained that micro-loans, which constitute over 60 per cent of the book, depend on physical collections by agents from client locations which could not be possible, resulting in 75 per cent of the slippages coming from this segment.

Additionally, it also restructured Rs 4,665 crore of loans, of which Rs 4,100 crore are from the microloans segment, he said, adding it has already started seeing repayments on this front. The overall restructured book is Rs 6,175 crore.

Ghosh said the pandemic is still on in parts of North East where it has business concentration, and additionally the political setbacks because of Assam's proposed law on microlending are yet to get over. Therefore, it will be difficult to give a breakup of the impact on asset quality because of the two headwinds, he said.

As a result of the asset quality reverses, the overall provisions shot up to Rs 1,374 crore from the year ago's Rs 849 crore, and included Rs 750 crore in accelerated provision. It is also carrying Rs 322 crore of provisions for recast loans.

There were no loan write-offs during the quarter which was one of the reasons for the gross NPAs coming higher, Samdani said.

The bank's core net interest income increased 16.73 per cent to Rs 2,114 crore on a credit growth of 8 per cent and 0.3 per cent expansion in net interest margin to 8.5 per cent.

The non-interest income increased 37 per cent to Rs 533 crore on better realisations by selling priority sector lending certificates, increase in treasury income and a help from the newly started third-party distribution fees, Samdani said.

The advances have de-grown 8 per cent when compared to the quarter-ago period, and Ghosh hinted that the advances growth may not exceed FY21's 20 per cent levels but will be better than 8 per cent.