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Investing.com - Investec (LON:INVP) has upgraded Bandhan Bank Ltd (NSE:BANH). (BANDHAN:IN) from Sell to Hold, raising its price target to INR200.00 from INR155.00, citing improved credit cost visibility.
The upgrade follows Bandhan Bank’s Q1 profit after tax of Rs3.7 billion, which represented a 17% quarter-over-quarter increase and exceeded estimates. The performance was driven by Rs2.5 billion in treasury gains and lower credit costs, resulting in an 80 basis point return on assets.
While microfinance institution (MFI) slippages improved quarter-over-quarter but remained elevated, Investec expects these to improve more meaningfully from the second half of fiscal year 2026, leading to lower credit costs. Net interest margin declined sharply by 30 basis points quarter-over-quarter to 6.4%, impacted by loan mix shift away from MFI and repo rate cuts.
Management expects 5-8% MFI growth and aims to increase the secured asset mix to 55% by fiscal year 2027, compared to 52% currently, to support 15-16% overall loan growth. Investec has cut its fiscal year 2026/2027 earnings per share estimates by 3-4%.
Investec now values Bandhan Bank at 1x June 2027 estimated book value, compared to 0.8x March 2027 estimated earlier, projecting return on assets at 1.2%/1.4% and return on equity at 10%/12% for fiscal years 2026/2027, with current valuation at 1x fiscal year 2027 estimated price-to-book value (9x price-to-earnings) appearing fair.
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