Motilal Oswal's research report on Bandhan Bank
BANDHAN reported a PAT of INR2.1b in 2QFY23 (63% miss), led by weaker operating performance across key metrics such as NII, other income, and operating expenses, along with higher provisions. Advances declined by 1% QoQ to INR958b as the MFI portfolio fell 7%, even as the non-MFI portfolio clocked an impressive growth (16% QoQ). Margin declined by 100bp QoQ to 7%, impacted by interest income reversals of ~INR3b in 2QFY23. Headline asset quality saw a minor improvement of 6bp QoQ each in GNPA/NNPA to 7.2%/1.9%, while PCR stood stable ~75.5%. Excluding NPA, CE improved marginally to 95% v/s 94% in Jun’22, though SMA overdue in the MFI book grew to 13.1% v/s 12.7% in 1QFY23, led by full dissolution of the restructured portfolio.
Outlook
We remain watchful of asset quality and the high SMA book, which can keep credit cost elevated. The management has raised its credit cost guidance for FY23 to 3% from 2.5% earlier, and has also guided at lower than trend growth due to tighter underwriting. We have cut our FY23/FY24 earnings estimate by 18%/11%. We maintain our Neutral rating.
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