Bandhan Bank rallied 3.5 percent in early trade on March 31, 2023. This happened after the Bank announced that it has sold Rs 2614 crore ARCs at a discount as per reports. Recently, Bandhan Bank shares hit three-year lows and have given a negative 7.54 percent return over the last week. The stock touched a 3-year low of Rs 185.45 on Tuesday due to volume-based heavy selling.
The recent price hence is near its record low of Rs 152 which was last witnessed during the peak of the Covid-19 pandemic on March 25, 2020. In the past two months, the stock has tanked 23 percent after the bank reported a 66.2 percent year-on-year (YoY) dip in its December quarter (Q3FY23) profit to Rs 290.6 crore, while its net interest income (NII) dropped 2.1 percent YoY to Rs 2,080.4 crore.
The Bank said, the fall in NII was mainly because of the higher reversal of interest income and also an increase in the cost of funds. The Bank's net interest margin for the quarter was 6.5 percent compared to 7 percent last quarter. During the quarter Bank has sold written-off loans of Rs 8,897 crore at an aggregate value of Rs 801 crore out of that Rs 387 crore has been issued as Security Receipts. The stock has given a negative 16.61 percent return since the start of this year.
How should investors navigate the current turmoil in Bandhan Bank stocks?
KRChoksey Shares and Securities analysts have stated that “Bandhan reported a subdued financial performance in Q3FY23, owing to slower growth in overall business, impacted NII Income and elevated levels of provisions which took a hit on the overall profitability. The credit growth was also modest owing to lower growth in its microfinance institution (MFI) segment” they added.
Still, on the asset quality front, analysts remain cautious about the MFI-stressed asset pool and accordingly kept credit costs slightly at higher levels. "We reduce our estimates for FY24E and have introduced FY25E. We expect CAGR in NII at 16.6 percent, PPoP at 8.8 percent, and PAT at 251.2 percent over FY22-25E," the brokerage firm said. On the other hand, Nuvama Institutional Equities in a recent report gave a hold rating to the stock due to the hit on overall profitability with a target price of Rs 265.
The management hence is focusing on overcoming the short-term challenges and aiming to build a long-term strategy for the bank and the investors are advised to consult a SEBI registered financial adviser before thinking of taking any positions in the stock.