Bandhan Bank - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 350; MCap - Rs. 56259 crore)

Bandhan Bank reported a reasonable set of numbers. Additional provision of Rs. 750 crore, related to Covid, impacted earnings trajectory.

Q1FY21 Earnings Summary

- Moratorium in micro finance portfolio which was at 100% in April 2020 has improved substantially to 30% as of 3rd July 2020. Mortgage book has witnessed marginal increase in moratorium at 15% as of June 2020 vs 13% in April 2020. MSME exposure has witnessed improvement with ~18% of advances under moratorium (35% in April 2020) and repayment from NBFC-MFI has revived to zero moratorium against ~59% in Q4FY20

- AUM growth of the merged entity decelerated to 17.7% YoY to Rs. 74331 crore (Rs. 71846 crore in Q4FY20). Disbursement witnessed healthy revival across portfolio, however, repayments led to moderation in overall credit off-take. Healthy traction continued in micro finance segment (~62% of merged AUM) at 21.2% YoY to Rs. 47478 crore, while non-micro finance book growth came lower at ~12% YoY, primarily due to 4% YoY growth in mortgages. Disbursement witnessed uptick across portfolio, except micro finance wherein expansion remained calibrated at Rs. 28593 crore; down 30% YoY, though sequentially regained strength compared to Rs. 19948 crore in Q4FY20. The bank added ~2.13 lakh in Q1FY21, slowest run rate owing to lockdown. Accordingly, total customer base stands at 2.03 crore

- On asset quality, absolute GNPA increased 1.4% QoQ to Rs. 1007 crore (including Rs. 385 crore related to IL&FS). GNPA ratio remained steady QoQ at to 1.4%, while NNPA ratio has improved by ~10 bps to 0.48%. Collection efficiency witnessed substantial improvement from ~29% in Q4FY20 to ~76% in Q1FY21 (normalized level of 98.5-99%). The bank has parked Rs. 750 crore of contingent provision related to Covid. Including earlier provision for Covid at Rs. 690 crore and standard asset provision on micro finance portfolio at Rs. 329 crore, total contingent provision stands at Rs. 1769 crore i.e 2.4% of advances (1.5% in Q4FY20)

- Margin have remained steady QoQ at 8.2%, though contracted YoY, led by faster decline in yield compared to cost of funds. Growth in NII moderated to 15% YoY to Rs. 1811 crore, led by slower traction in advances. Other income trajectory grew at 17% YoY to Rs. 387 crore. Bank received Rs. 474 crore from sale of PSLC, of which Rs. 118.5 crore have been recognized in the quarter. Subsequently, operational profit (PPP) came at Rs. 1584 crore, up 16.8% YoY, marginally below our estimate. However, higher than expected provision at Rs. 849 crore, including Rs. 750 crore related to Covid (~1% of AUM), impacted earnings trajectory to Rs. 550 crore; down 31.6% YoY

- Deposit accretion continued to remain healthy at 35% YoY to Rs. 60610 crore. Continued focus on garnering low cost deposit led to ~24 bps QoQ improvement in CASA ratio to 37.08%. Proportion of retail deposits continue to remain healthy at 77.7% in Q1FY21, though a tad lower compared to 78.4% in Q4FY20

- Though slippages in asset quality related to Covid is difficult to quantify, however, contingent provision at 2.3% of advances provides healthy cushion against uncertainty ahead

We will be coming out with a detailed report soon.

Shares of Bandhan Bank Ltd was last trading in BSE at Rs.349.65 as compared to the previous close of Rs. 352.4. The total number of shares traded during the day was 728878 in over 9133 trades.

The stock hit an intraday high of Rs. 370 and intraday low of 345.35. The net turnover during the day was Rs. 261590549.

Source : Equity Bulls

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