| Advances grew 16% YoY, helped by a 27% increase in the non-EEB loan portfolio, while the share of secured loans increased to 57%. The bank maintained its FY27 lending growth forecast at 14%, with non-EEB loans expected to grow by over 20%. Management expects net interest margin to decline slightly as pressure on funding costs continues and technology investment remains high. Axis Securities maintained its Buy rating and raised its target price to Rs 235 from Rs 205. |
Bandhan Bank’s asset quality continued to improve in the June quarter, with management reaffirming its FY27 loan cost guidance of 1.6-1.8 per cent, although trends in its core emerging entrepreneurs (EEB) portfolio remained encouraging.
Gross slippages remained largely contained, while EEB slippages declined sequentially due to tighter underwriting and targeted collections. Credit costs fell to 1.81 per cent from 1.86 per cent in the previous quarter, according to Axis Securities, and the brokerage expects them to be around 1.7 per cent in FY27-29, close to the lower end of management’s guidance.
While the 0-90 day arrears pool increased to 3.5% from 3.1% in the previous quarter, management attributed this mainly to temporary disruptions caused by the West Bengal elections and cluster holidays in April. He expects credit costs to continue to improve gradually as these factors decline.
Asset quality strengthened despite a seasonally weaker first quarter, with gross and net non-performing asset ratios improving to 3.15% and 0.93%, respectively, from 3.27% and 0.97% in the March quarter. New drawdowns remained largely stable at Rs 10.8 billion compared to Rs 10.3 billion in the previous quarter, while the improvements were driven by mortgage book ARC sales and portfolio write-downs.
Forecasts
The bank maintained its FY27 lending growth forecast at 14%, with management expecting the non-EEB portfolio to grow by over 20% and the EEB portfolio by 5-10%, depending on the improving operating environment. Advances grew 16% year-on-year in the June quarter, driven entirely by non-EEB business, which grew 27% year-on-year, led by retail assets and wholesale banking. The secured portfolio now represents 57% of the total loan portfolio, reflecting continued diversification.
In retail lending, growth was driven by commercial vehicle and construction equipment finance, auto loans and gold loans, while wholesale banking grew 38% year-on-year due to stronger customer relationships. The bank also launched forex and cash management products to increase fee income from wholesale clients and diversify revenue streams.
Management acknowledged that margin expansion is likely to remain limited as the benefits of deposit repricing have largely subsided and funding costs remain high. It expects net interest margin to soften slightly in FY27 while continuing to optimize its loan structure and pricing. Increased investment in technology and digital infrastructure is expected to support a strong operating expense ratio in the near term, with productivity gains likely to emerge after FY28.
The brokerage maintained a Buy rating on the stock and raised its target price to Rs 235 from Rs 205, saying further reduction in credit costs, improved fee income and a more diversified balance sheet should support gradual improvement in profitability, even as external headwinds delay earnings normalization.
- Published Jul 23, 2026 at 1:36 pm EST.
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