Bandhan Bank - Q2FY21 Result Update - ICICI Securities

Bandhan Bank posted reasonable results with NII increasing 25.8% YoY and 6.2% QoQ to Rs. 1923 crore, helped by 22.6% YoY growth in net advances. NIM for the quarter contracted ~20 bps YoY to 8.0% as a result of faster decline in yields that fell 30 bps QoQ to 13.3% compared to Cost of funds (CoF), which were down 20 bps QoQ to 6.2%. C/I ratio increased QoQ 15 bps to 29.4% on account of newer employee and branch addition along with increased business activity. PBT grew 6% YoY while net profit optically declines at 5.3% to Rs. 920 crore, led by implementation of new tax regime in last year. Overall collection efficiency for the bank was at 92% in September 2020 in which collection efficiency for emerging enterprise business (micro banking) has improved to 89% for September 2020 and 91% in October 2020. Collection in housing segment has touched 98% level in September 2020.

Valuation & Outlook

Prudent management, lower restructuring pipeline and improving collection efficiency bode well for a high margin/ RoA generating bank. Provision buffer at 2.8% of advances provides comfort. Focus on expanding in housing segment to reduce balance sheet risk while improving business parameters will aid earnings profile and return ratios to return to >3% RoA and >20% RoE. We maintain our target price to Rs. 400/share, valuing the stock at 3x FY22E ABV (~13x FY22E EPS). We upgrade from HOLD to BUY as stock price moderated from highs and valuations look reasonable now.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BandhanBank_Q2FY21.pdf

Shares of Bandhan Bank Ltd was last trading in BSE at Rs.308.2 as compared to the previous close of Rs. 300.85. The total number of shares traded during the day was 306504 in over 5704 trades.

The stock hit an intraday high of Rs. 315 and intraday low of 304.15. The net turnover during the day was Rs. 95124372.

Source : Equity Bulls

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