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Informist, Thursday, Jul. 17, 2025

By Shubham Rana

NEW DELHI – Bandhan Bank is expected to post a sharp year-on-year fall in its net profit for the June quarter because of slower loan growth and higher provisions, according to analysts. Continued stress in the microfinance sector portfolio is also likely to weigh on the bank's net profit due to lower margins and higher credit costs, analysts said.

Bandhan Bank is expected to post a net profit of INR 3.45 billion for the June quarter, down 68% on year, according to estimates from nine brokerages. However, sequentially, the net profit is seen rising 9%. The bank reported a net profit of INR 3.18 billion in the March quarter, up nearly six times from a year ago, due to a 29% decline in provisions. The bank had provisions worth INR 37.65 billion during 2024-25 (Apr-Mar), up 2% on year.

The Kolkata-based lender's asset quality worsened in FY25, with the gross non-performing asset ratio rising to 4.71% as of end March, compared with 3.84% a year ago. The net NPA ratio at the end of March was 1.28%, up from 1.11% a year earlier.

The lender is scheduled to announce its financial results for the June quarter on Friday. Shares of the bank have risen 12% since it declared its earnings for Jan-Mar on Apr. 30. On Thursday, shares of the bank ended 0.8% higher at INR 185.19 on the National Stock Exchange.

Bandhan Bank has reported modest loan growth with advances rising 6.4% on year to INR 1.34 trillion as of Jun. 30. The bank's deposits grew 16.1% to INR 1.55 trillion as of the end of June, according to provisional figures released by the bank earlier this month.

The lender's net interest income – the difference between interest earned and expended – is seen falling 11% on year and 3% on quarter to INR 26.84 billion in Apr-Jun, according to the average of estimates.

Bandhan Bank's net interest margin is expected to decline from the 6.7% it reported in Jan-Mar. Nomura Equary Research analysts expect Bandhan Bank's net interest margin to fall to 6.5% in the June quarter due to a decline in the higher-yielding microfinance segment, as well as the Reserve Bank of India's benchmark repo rate cuts. Margins are expected to be lower across the banking sector in the June quarter following the RBI's 100 bps reduction in the repo rate this calendar year, including the 50 bps cut in June.

Stress in microfinance loans is expected to keep credit cost elevated, but should moderate on a quarter-on-quarter basis, Nomura said in a pre-earnings report. Bandhan Bank's credit costs fell by 187 basis points on year to 3.9% during Jan-Mar, and fresh slippages increased to INR 17.50 billion from INR 16.20 billion a quarter ago. According to Kotak Institutional Equities, slippages are expected to rise to around INR 15 billion from INR 9 billion a year ago due to the stress in the microfinance industry.

Bandhan Bank mainly focuses on the microfinance sector, which had an over 40% share in the total loan book as of Mar. 31, down from the 50% share a year ago. The emerging entrepreneurs segment, which focuses on microloans, accounted for 26% of Bandhan Bank's total loan book as of the end of March, while small business and agricultural loans accounted for 15%. 

The bank's management said in April that it expects a steady recovery in its microfinance portfolio over the coming quarters. 

The microfinance sector has been growing rapidly over the past few years, but is facing stress due to high delinquencies, over-indebtedness, and weak loan recovery. India Ratings and Research earlier this month said the microfinance sector will continue to face headwinds in the first half of FY26.

The microfinance portfolio of Bandhan Bank will be a key monitorable, along with the bank's medium-term strategy on margin, Kotak Institutional Equities said in a report. This will be important given that the economy is now in an interest rate easing cycle.

Of the thirteen brokerage reports on Bandhan Bank available with Informist, six have a ‘buy' rating with an average target price of INR 188, while five have a 'hold' rating with an average target price of INR 172. Two brokerages have maintained a ‘sell' rating at an average target price of INR 145.

Following are the Apr-Jun earnings estimates for Bandhan Bank based on reports from nine brokerages in descending order by the estimate of net profit:

End

Edited by Saji George Titus

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