Bandhan Bank ended the week with an impressive rise in shares in the week that ended on 2nd December. Barring for the exception of 1st December, Bandhan Bank got better steadily the entire week.
It was said that the stock surged up more than 9.5% in the last five trading sessions. At the recent meeting of the analysts, Bandhan Bank pointed out its portfolio assortment, geographical enlargement, and plans for future growth with delinquency and provisioning assessment for the latter half of the financial year 2023.
The market experts of JM Financial and ICICI Securities have suggested buying the shares of Bandhan Bank with the target price ranging from ₹325 to ₹365 for each share.
Bandhan Bank’s market cap has been around ₹38,675.92 crores. Bandhan Bank’s stocks on Friday 2nd December surged at ₹240.10 apiece by 1.91% on the Bombay Stock Exchange.
The Bandhan Bank stocks catapulted by nearly 15% on Dalal Street, as compared to its 52-week low of ₹209.45 per share that was observed last month.
The experts from JM Financial identified that Bandhan Bank’s management in the latest analysts’ meeting has highlighted their strategic priorities on going forward. These basically are portfolio assortment, geographical expansion, impetus on granular deposits, and modernization of its IT and digital capacities. Bandhan bank planning to expand its non-MFI vertical (Housing, Commercial Banking, and Retail Assets) at a rapid pace to reduce its share of EEB (Group Loans) to 26% by FY25E (vs 40% in Sep’22).
The bank’s credit costs have been increased on account of higher errors from the restructured book and floods in Assam, the management expects credit costs to peak in 3Q23 and then start stabilizing towards steady-state credit costs of 1.8%. As indicated by the senior management of Bandhan Bank, the geographical expansion of its EEB portfolio is on schedule, with Assam and West Bengal contributing <50% of the EEB book as of 1HFY23 (vs 60% in FY20) and it is said to further reduce to 40% by FY25E.
JM Financial in its note said, “We build in credit costs of 3.9%/2.5% in FY23E/24E. Management highlighted that post the asset mix change they expect NIMs to be c.7.5% (vs 8% on the earlier asset mix), however, lower credit costs on account of a higher share of secured lending (46% of the total book by FY25E vs. 38% as of Sep 22) should aid the bank in delivering a steady-state RoA of 3% (as per management).”
Moreover, the bank’s recovery has been delayed against various other microfinance lenders given the prolonged COVID effect and concentration. JM Financial’s note added further, “This has led to significant stock price underperformance over the 6M/12M basis (21.5%/18.5% for Banknifty vs -28.4%/-15.5% for Bandhan).”
“We see a) delivery on current guidance (peak stress in 3Q and moderation of credit costs thereafter), b) efforts to diversify, and c) building up of provision buffers should result in confidence coming back in the bank’s medium-term return prospects. In this context, current valuations (1.5x FY24E BVPS) offer a favourable risk-reward. We maintain BUY with revised TP of ₹325,” the details included.
Bandhan Bank is a fast-growing banking and financial services organization headquartered in Kolkata. Founded in 2001, Bandhan Bank is having it s strong presence in 34 states and union territories of India with a customer base of 2.77 crores and operates through its 5646 banking outlets.
