The share price of Bandhan Bank declined by 26.85 points or 7.87 per cent to close at 314.20 on the Bombay Stock Exchange (BSE) on Friday. Similarly, on the National Stock Exchange, the shares closed at 314.95 down by 25.75 points or 7.56 per cent. In the last two days, shares of the bank tripped by around 11 per cent on the BSE. Whereas in the last one month, there has been a dip of 19 per cent in the share prices of the bank as compared to a 7 per cent rise in the S&P BSE Sensex. The main reason behind the fall is said to be the poor quarterly results and cut in FY21 earnings estimates by certain brokerages.
Quarterly Results
The bank on January 21 released its December quarter results and reported a 13.4 per cent decline in the net profit to Rs 633 crore compared to Rs 731 crore for the year-ago period. However, the core net interest income of the company grew 34 per cent to Rs 1,541 crore on the back of a widening in net interest margin to 8.3 per cent from 7.9 per cent and 22.6 per cent growth in the loan book.
The Kolkata-based private lender also witnessed a decline in its gross NPAs to 1.1 percent from 1.18 per cent on QoQ basis and net NPAs were down to 0.26 per cent from 0.36 per cent QoQ.
What the brokerages say?
Concerns have been raised by the brokerages over the bank’s higher than expected credit costs and uncertainties lying ahead over the political promises of microfinance loan waivers in Assam and West Bengal.
CLSA: According to a CLSA Asia-Pacific Markets, the net profit of Bandhan Bank has missed its estimate by 20 percent, mainly due to a higher than expected credit cost. The brokerage firm further said that the recent political events in Assam have also led to the decline of 10 percent in collections in Assam in January 2021 (from 88 percent to 78 percent).
To account for higher credit costs, CLSA has trimmed its FY21 earnings by 15 percent and has also downgraded its rating from Buy to Outperform and has cut its price target by 12 percent to Rs 390.
ICICI Direct: The firm said that the performance and development of asset quality in states like Assam and West Bengal will call for a cautious approach for the next quarter. Therefore, ICICI Direct downgraded its rating from Buy to Hold with a revised target price of Rs 370.
Goldman Sachs: The brokerage firm maintained a Buy call with a target price of Rs 484 per share for the bank. The firm is also of the opinion that the near-term narrative around loan waiver could weigh on stock performance.
Motilal Oswal: The firm maintained a neutral rating on the stock.
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