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Bandhan Bank has released their Q1 FY2022 results. The bank reported net profit down 32% year-on-year (y-o-y) to Rs 373 crores. This slip has come on the back of a rise in provisions on bad loans, which grew by 62% for the bank to Rs 1,375 crore in the quarter under review. The provision coverage ratio in the preceding quarter was 50%.

Total income, however, was up 20.4% at Rs 2,647.50 crore in the quarter against Rs 2,198.30 crore in the year-ago period. Bandhan Bank registered a record operating profit of Rs 1,871 crore in Q1 FY2022 against Rs 1,584.2 crore reported in the Q1 FY2021.

Net interest income for Bandhan Bank rose 16.7% to Rs 1,811 crore in Q1 FY2022 even as non-interest income grew 37.7% to RS 533.4 crore y-o-y.

Gross NPA asset ratio rose to 8.2% in the June quarter from 6.8% in the march quarter and  1.4% in the year ago period. The bank also Current account savings account (CASA) deposits slip to to 43% of total deposits against 43.4% a year ago.

Bandhan Bank’s stock settled 0.43% up at Rs 291.30 on BSE at the end of trading session on 30 July, 2021.

Hits

  • Total income grew 20.4% to Rs 2,647.50 crore in the quarter against Rs 2,198.30 crore in the year-ago period
  • Operating profit at Rs 1,871 crore, up from Rs 1,584 crore in same quarter last year.
  • Bandhan Bank’s non-interest income grew by 37.7% to Rs 533.4 crore
  • Total advances rose 8.1% y-o-y to Rs 80,357 crore
  • Bandhan Bank disbursed microfinance loans worth Rs 78,560 crore in the June quarter
  • Deposits for the bank rose 27.6% from a year ago to Rs 77,335.5 crore.

Misses

  • Bandhan Bank’s net profit fell 32% year-on-year to Rs 373 crore
  • The bank’s gross NPA ratio rose to 8.2% in the quarter ended June, from 6.8% in the March quarter
  • Net NPAs (or bad loans) also jumped to 3.3%, up from 0.5% last year.
  • Provisions rose sharply by 62% year-on-year to Rs 1,375 crore
  • CASA was reported at 43% from 43.4% y-o-y

Company Statement

“Typically, second half of the financial year is always better for the bank in terms of growth and collections,” Chandra Shekhar Ghosh, managing director and chief executive at Bandhan Bank, said in a statement. “With easing of Covid-19 second wave and upcoming festive season, we’re confident of achieving better performance going forward.”

What This Means For The Investor

While at the outset, the number may not seem jubilant, the bank has managed to beat street estimates and deliver resilient growth in key areas that banks are generally analyzed on – NII, Deposits, CASA and NPAs. The fact that the bank had made a large provision may be construed as prudence on the part of the management team even though it affected net profit by a large extent. The management are confident of a better second half of the year for the Bank. That said, Bandhan Bank stock, at a P/E of 21.38 looks overvalued against the sector average of 13.57. Speak to your financial advisor before you invest in the stock market.

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