Analyst Concall
Bandhan Bk sees steady improvement in microfinance sector
This story was originally published at 19:11 IST on 30 April 2025
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--Bandhan Bank: See steady improvement in microfinance segment going ahead
--CONTEXT: Comments by Bandhan Bank's mgmt in post-earnings analyst concall
--Bandhan Bank: Aiming 15-17% advances growth for over next 3 years
--Bandhan Bank: Aim to expand asset book, improve asset quality in FY26
--Bandhan Bank: See some moderation in NIM in coming years
--Bandhan Bank: Credit cost expected to remain eleveated Apr-Sept
--Bandhan Bank: Aiming credit cost at 1.5-1.6% in next 2-3 years
--Bandhan Bank: Expect loan loss provisions to come down
--Bandhan Bank: Expect microfin credit cost to come down from current level
--Bandhan Bank: Disbursals to be muted in Apr-Jun, pick up from Oct-Mar
By Sachi Pandey
MUMBAI – Bandhan Bank expects a steady recovery in its microfinance portfolio in the coming quarters, supported by recent regulatory and monetary steps taken by the Reserve Bank of India, the management said at a post-earnings call with analysts on Wednesday. "The microfinance sector has faced significant stress and the overall liquidity tightness in the system has impacted both growth and profitability at industry level...the recent regulatory and monetary action taken by RBI has been very positive and we expect to see gradual steady improvement in the MFI segment in the coming few months," the management said.
Talking about advances, the bank aims to grow its advances by 15–17% annually over the next three years, with a clear focus on increasing the share of secured loans. As of Mar. 31, the gross advances of lender rose 10% on year to INR 1.37 trillion.
The bank also expects some moderation in margins. "As our secured mix increases, net interest margins could fall by 50-60 basis points, but we expect to offset part of it with a 20-bps gain from other income streams," the management said. The bank's net interest margin for Jan-Mar stood at 6.7%.
Bandhan Bank plans to improve asset quality and continue to invest in technology to boost customer experience and operational efficiency. "We are embedding risk management and compliance into every part of our strategy," the management added. For quarter ended March, Bandhan Bank's asset quality was largely stable with gross non-performing asset ratio at 4.71% as of Mar. 31, up from 4.68% a quarter ago. The net non-performing asset ratio was unchanged at 1.28%. The provision coverage ratio of lender stood at 73.7%.
On the credit cost front, Bandhan Bank aims to bring them down to 1.5–1.6% over the next 2–3 years. "While credit costs remain elevated at present, we are focused on bringing them down over the couple of quarters. It is expected to remain elevated in Apr-Sept, and moderate in the next half of the year," the management added. The bank also expects microfinance credit costs to decline from current levels. The bank's credit cost for Jan-Mar stood at 3.9%, while for 2024-25 (Apr-Mar) the credit cost was at 2.9%.
The bank expects loan loss provisions to decline as asset quality improves and the portfolio shifts toward more secured loans. "Going forward, we believe that the loan loss provisions would be comparatively lesser, especially the incremental loan loss provision," the management added.
Business growth may remain muted in Apr-Jun, but disbursals are likely to pick up from Jul-Sept and normalise by the December quarter, the bank's management said. For the March quarter, the retail disbursements of bank were at INR 77.00 billion, while emerging entrepreneurs' business loan disbursements stood at INR 535 billion.
The bank released its results after market hours on Wednesday. The lender's shares ended 1.4% lower at INR 165.62 on the National Stock Exchange. End
Edited by Akul Nishant Akhoury
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