EUR 120.00 For Business Accounts Only

MOSL: BANDHAN BANK (Neutral) - Asset quality deteriorates; CE remains key monitorable

BANDHAN BANK: Asset quality deteriorates; CE remains key monitorable

(BANDHAN IN, Mkt Cap USD6.3b, CMP INR291, TP INR330, 13% Upside, Neutral)

 

SMA overdue/restructured book increases to ~21%/6.6%

• Bandhan Bank (BANDHAN) reported 1QFY22 PAT of INR3.7b, above our estimate - supported by margin improvement (170bp QoQ) and lower provisions v/s MOFSLe- even as MFI loans / total AUM declined 9%/~8% QoQ. On the liability front, the CASA ratio came in stable at ~43%, while the proportion of retail deposits improved to ~83% (v/s 79% in FY21).
• Slippage was elevated at INR16.8b (annualized slippage ratio of ~9%), with MFI slippage at ~INR10.4b. Therefore, the GNPA ratio increased 137bp QoQ to ~8.2%. Provisions were elevated, with annualized credit cost at 7.2% of loans. Thus, the provision coverage ratio (PCR) improved to ~62% of loans (v/s 50% in FY21). The restructured book increased sharply to ~INR53b (6.6% of total AUM). SMA loans surged to 21%, while a large portion of the SMA overdue in Assam was eligible for a relief package. As a result, LGDs would remain controlled.
• Collection efficiency (excluding NPAs) in the MFI portfolio stood at 86% (~85% for West Bengal) and remains a key monitorable in the near term. Overall, asset quality remains uncertain, and we estimate credit costs to remain elevated at 5.5% of loans for FY22 (similar to FY21 levels). Maintain Neutral.