Neutral Bandhan Bank; target of Rs 175: Motilal Oswal

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Loan growth: Bandhan Bank's loan growth remains modest, with a 15% YoY growth, led by 20% YoY growth in the non-EEB book. The EEB book was flat QoQ, but management expects growth to resume in 2HFY27.
  • Margin performance: NIM contracted 9bp QoQ to 6.1%, in line with estimates, due to a 10bp decline in yield on assets and flat cost of funds. Management expects NIM to remain rangebound.
  • Asset quality: The GNPA ratio improved 4bp QoQ to 3.11%, while the NNPA improved 1bp QoQ to 0.92%. Fresh slippages rose to INR11.3b, but management expects the recovery run-rate to remain healthy.
  • Cost discipline: Opex rose 16% YoY, but the C/I ratio dipped to 57.5% from 61.5% in 1QFY27, driven by technology-related operating efficiencies.

Thesis Validation Checklist

  • Business growth: Monitor loan growth, particularly in the EEB and housing book, to see if management's guidance of 14% YoY growth is met.
  • Margin trends: Track NIM to see if it remains rangebound, and monitor other income growth, which is expected to support overall profitability.
  • Asset quality: Watch for slippages and recovery trends to assess the effectiveness of management's strategies.
  • Cost control: Monitor opex growth and the C/I ratio to see if cost discipline is maintained.