Earnings Outlook
Microfinance stress to weigh on Bandhan Bank Oct-Dec PAT
This story was originally published at 21:28 IST on 29 January 2025
Register to read our real-time news.Informist, Wednesday, Jan. 29, 2025
By Kabir Sharma
MUMBAI – Stress in the microfinance portfolio of Bandhan Bank is expected to weigh heavily on the Kolkata-based lender's net profit for the quarter ended December, which is seen only 2.4% higher year-on-year, according to the average of estimates from 11 brokerage firms. The private lender is expected to report a net profit of INR 7.50 billion for Oct-Dec.
Bandhan Bank will announce its results on Friday. On Wednesday, its shares ended 0.5% lower at INR 150.34 on the National Stock Exchange.
According to Emkay Global Financial Services, Bandhan Bank's fresh slippages will be sequentially higher in Oct-Dec "due to stress in the MFI (microfinance) portfolio amid rising stress in West Bengal". In Jul-Sept, the bank had seen fresh slippages of INR 11.15 billion, with INR 7.52 billion coming from its Emerging Entrepreneurs Business vertical, which includes group loans and small business and agriculture loans.
As on Sept. 30, the Emerging Entrepreneurs Business book stood at INR 592.88 billion, shrinking 4% sequentially. The bank informed the exchanges earlier this month that the collection efficiency for the vertical declined further to 97.4% in Oct-Dec from 98.1% in Jul-Sept. For the bank as a whole, the collection efficiency fell to 97.6% from 98.2% in Jul-Sept. As a result, provisions are expected to rise, brokerages said, with the bank having set aside INR 6.06 billion in Jul-Sept. The bank's management had in October guided for a further increase in credit cost, which rose to 2.0% in Jul-Sept. Just for the Emerging Entrepreneurs Business vertical, the bank has assumed a credit cost of more than 3% for 2024-25 (Apr-Mar) as part of its overall guidance of 1.8-2.0%.
Rise in credit cost and slowdown in loan growth--gross advances were up 15.0% on year as on Dec. 31, down from 21.4% at the end of September--is expected to exert pressure on Bandhan Bank's margin in Oct-Dec from 7.4% in Jul-Sept. Net interest income for the December quarter is seen 18.0% higher on year at INR 29.80 billion. In Jul-Sept, the net interest income had grown 20.7%.
Analysts said they will watch for the bank's outlook on the microfinance portfolio as well as the medium-term strategy following a change in management, with Partha Pratim Sengupta taking charge as managing director and chief executive officer on Nov. 1.
Following are the Oct-Dec earnings estimates for Bandhan Bank based on reports from 11 brokerage firms in descending order by the estimate of net profit:
| Brokerage Firm | NII (in INR million) | Net Profit (in INR million) |
| JM Financial Institutional Securities Pvt Ltd | 30,538.00 | 9,862.00 |
| Nirmal Bang Equities Pvt Ltd | 30,229.00 | 8,348.00 |
| Motilal Oswal Financial Services Ltd | 29,968.00 | 7,957.00 |
| Nuvama Wealth Management Ltd | 29,500.00 | 7,900.00 |
| Emkay Global Financial Services Ltd | 30,064.00 | 7,626.00 |
| Nomura Equity Research | 28,400.00 | 7,100.00 |
| KR Choksey Research | 30,139.00 | 7,055.00 |
| Axis Securities Ltd | 30,000.00 | 6,990.00 |
| Elara Securities (India) Pvt Ltd | 28,919.00 | 6,665.00 |
| Anand Rathi Share and Stock Brokers Ltd | 30,127.00 | 6,626.00 |
| Kotak Institutional Equities | 29,900.00 | 6,419.00 |
| Average | 29,798.55 | 7,504.36 |
End
Edited by Ashish Shirke
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