PremiumShares of Bandhan Bank have been an underperformer as the stock is trading around its 52-week level of ₹229 apiece that it had hit in December last year as compared to its benchmark index Nifty Bank which has been hovering around its 52-week high level.
Bandhan Bank reported a muted second quarter (Q2 FY23) with net profit at just ₹209 crore for the September quarter, owing to a sharp decline in net interest margins and higher provisioning. While it reported a net loss of ₹3,008 crore in the year ago, profit was down sequentially from ₹886.5 crore. Its net interest income rose 13.3% from the year earlier to ₹2,193 crore, while net interest margin (NIM) fell to 7% in from 8% in the June quarter.
"Strong growth in advances and deposits driven by the retail segment, improving asset quality, pick-up in economic activities, and ongoing festive/ wedding season auger well for the company’s performance in future. The stock is currently trading at attractive valuations, close to its 52-week low share price," said brokerage Geojit. Hence, the brokerage house has upgraded its rating on the bank stock to Buy with a revised target price of ₹282 per share.
“Bandhan Bank’s Q2FY23 earnings missed our estimates with a disappointing performance on asset quality, impairment recognition on the entire restructured portfolio (slippages at 19.2% annualised), and consequent accelerated write-offs (17% annualised)," said HDFC Securities.
The asset quality outcomes during the quarter and the management commentary around growing vulnerabilities and borrower behaviour in its core EEB segment suggest existential questions on the quality and recoverability of the bank's core customer franchise. Elevated slippages and write-offs in the core EEB portfolio raise concerns about the underlying customer franchise and the bank’s ability to maintain asset quality and strong profitability, the note stated.
“More importantly, we highlight the diminishing confidence in the core customer franchise. We argue for a material deflation in the valuation multiple and downgrade Bandhan Bank shares' rating from BUY to ADD, with a revised target price of ₹309 apiece," recommended HDFC Securities.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.