Bandhan Bank's Q2FY24 results revealed a year-on-year net profit surge to Rs 721 crore ($96.7 million) and a net interest income (NII) increase to Rs 2,443 crore ($328 million). Despite these positive figures, the bank's performance did not meet analysts' expectations due to higher operational expenses, an elevated slippage run-rate, and a cost-income (C/I) ratio of 47%. The bank's gross non-performing asset (NPA) figure remained steady at 7.3%, while its special mention account (SMA) book saw a quarter-on-quarter decline of 130 basis points.
According to InvestingPro's real-time metrics, Bandhan Bank is quickly burning through cash, and its revenue growth has been slowing down recently. This aligns with the bank's addition of Rs 1,550 crore ($208 million) to the SMA pool in the Emerging Entrepreneurs Business (EEB) vertical, which was within its guidance of 3%. This was perceived as a higher stress level compared to other lenders. The fresh addition to the EEB SMA (1-90 DPD) pool remained high at 3%, marginally higher quarter-on-quarter, despite an asset growth of just 1% over the same period. Coverage Efficiency (CE) remained steady at 98%.
InvestingPro Tips indicates that Bandhan Bank is a prominent player in the Banks industry, despite suffering from weak gross profit margins. Analysts predict the bank will be profitable this year, which is reinforced by the fact that the bank has been profitable over the last twelve months. For more insights like these, you can explore InvestingPro's additional tips.
Brokerages Motilal Oswal Securities and Nuvama Institutional Equities have revised their profit forecasts downwards for FY24 and FY25 due to concerns over asset quality and potential recovery from CGFMU and ECLGS. Motilal Oswal has set a target of Rs 250 ($3.36) for the stock, while Nuvama has maintained a 'HOLD' rating. Nuvama kept its target multiple unchanged at 1.4 times BV FY25E but lowered its target to Rs 235 ($3.16) from Rs 242 ($3.25).
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