REPEAT
Slippages, credit cost to stay elevated Oct-Dec - Bandhan Bk
This story was originally published at 09:57 IST on 26 October 2024
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--Bandhan Bank: Credit cost guidance at 3% for microfinance book FY25
--Bandhan Bank: May see some moderation in NIM in coming qtrs
--Bandhan Bank: Credit costs to remain elevated in Oct-Dec
--Bandhan Bank: Hope credit costs, slippages will moderate in Jan-Mar
--Bandhan Bank: Will work on combatting slippages in microfin sector Oct-Dec
--Bandhan Bank: Slippages to remain elevated in Oct-Dec
--Bandhan Bank: Will keep diversifying secured loan portfolio
--Bandhan Bk: To stay focussed on raising housing finance, wholesale finance
--Bandhan Bank: Stress in microfinance sector increased in Jul-Sept
--Bandhan Bank: Deposit mkt remains competitive, impacting deposit costs
--CONTEXT: Comments by Bandhan Bank mgmt in post-earnings conference call
--Bandhan Bank: Microfin industry facing headwinds, asset quality challenges
By Priyasmita Dutta and Richard Fargose
NEW DELHI – The rise in credit costs and slippages – both of which were elevated in Jul-Sept – is likely to continue in Oct-Dec as well, Bandhan Bank's senior management said in a post-earnings conference call with analysts. In Jul-Sept, credit costs were at 2.0%, higher than the 1.6% at the end of June, but lower than the 2.5% in the corresponding period last year. Fresh slippages, on the other hand, were to the tune of INR 11.1 billion at the end of September, as against INR 8.9 billion at the end of June.
Slippages will remain elevated primarily owing to the share of unsecured loans in its total loan portfolio. In its total loan book, the share of emerging entrepreneur business loans was 33.2% as of Sep.30, as against 32.3% at the end of June and 29.2% at the end of September last year.
During Jul-Sept, Bandhan Bank saw stress in the microfinance sector, Interim Managing Director and Chief Executive Officer Ratan Kumar Kesh said. He said this stress was not just unique to Bandhan Bank but was seen throughout the sector. The entire microfinance industry is facing headwinds and asset quality challenges, Kesh said.
His comments on lending by microfinance companies follow the Reserve Bank of India taking action against four microfinance companies – Asirvad Micro Finance Ltd., Arohan Financial Services Ltd., DMI Finance Pvt. Ltd. and Navi Finserv Ltd. – asking them to cease and desist from sanction and disbursal of loans.
On being asked about any regulatory risks that have been flagged by the RBI against Bandhan Bank so far – which has significant exposure to small ticket borrowers – the Kolkata-based bank's Executive Director and Chief Business Officer Rajinder Kumar Babbar said the bank was complying with all regulatory requirements and was taking appropriate actions against risks.
He added that going forward, in Oct-Dec, the bank will further increase its efforts at countering slippages in the microfinance segment.
Financial results for Jul-Sept, released after market hours Friday, showed the bank's provisioning against bad loans was down 4.7% on year but up 15.9% sequentially to INR 6.06 billion. The lender reported a net profit of INR 9.37 billion in the quarter under review, up 30% from the corresponding quarter a year ago. Sequentially, it was down 11.9%.
Credit rating agencies have cautioned about the asset quality of Indian lenders' unsecured loan books, saying that early signs of stress were visible in this segment. In a round-up of ratings for the first half of 2024-25 (Apr-Mar), all the four major Indian agencies called for close monitoring of the same by banks and non-banking financial companies. Babbar said that in the current ecosystem of stress in unsecured loans, the bank will focus on diversifying the secured portfolio. "We will focus on improving retail book, especially in housing finance and wholesale financing," Babbar said.
Looking back at Jul-Sept, Babbar said the bank had higher deposit rates during the quarter, primarily owing to the competition in the system. In the respective period, the lender's deposits were up 27.2% on year, higher than the growth in advances. Gross advances grew 21% on year to INR 1.31 trillion as of Sept. 30.
Further, Babbar said that while the stress on credit costs and slippages are seen higher in Oct-Dec, it will ease from Jan-Mar. He added that the credit cost for the microfinance segment in FY25 is seen at 3%.
The net interest margin, which went up to 7.4% at the end of September, may also see some moderation in future quarters, he added. End
Edited by Tanima Banerjee
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