We initiate coverage on Bandhan Bank with a BUY rating and fair value estimate of Rs490 based on 3.5x 1HFY23E ABV. Bandhan Bank enjoys a dominant position in the Indian micro-finance industry. Having maintained 20% market share over the last 4 years, we believe that Bandhan Bank is strongly positioned to gain in an industry which is expected to grow at 15% CAGR over FY21-26E. Bandhan Bank's loans have grown at a 30% CAGR over FY17-20, backed by very high-quality and granular growth in deposits. While micro-finance is expected to continue on the strong growth trajectory for the bank, we expect non-micro-finance segments to grow at a higher rate given the management's vision 2025. We also expect Bandhan Bank to gain deposit market share, especially...

Overall collection efficiency for the bank was at 92% in September 2020 in which collection efficiency for emerging enterprise business (micro banking) has improved to 89% for September 2020 and 91% in October 2020. Collection in housing segment has touched 98% level in September 2020. Asset quality improved QoQ as GNPA, NNPA for Q2FY21 declined ~25 bps, ~12 bps to 1.18%, 0.36%, respectively. However, asset quality benefited from Supreme Court's order. On standstill asset classification basis, GNPA, NNPA would have increased ~11 bps, ~36 bps to 1.54%, 0.72%,...

Our in-house Economic Activity Index (EAI) for India's GVA (called EAI-GVA) posted growth of 2.2% YoY for the first time in seven months in Sep'20, following decline of 2.2% YoY in Aug'20. This implies EAI-GVA shrank just 1.7% YoY in 2QFY21 v/s -18% YoY in 1QFY21. Industrial activity contracted marginally (by 0.7% YoY), while the Services sector grew 3.1% YoY (for the first time in six months) in Sep'20. Growth in farm activity eased to 5.4% YoY in Sep'20, from the double digits in the previous three months, due to decline in fertilizer production. The EAI-GDP index (our in-house measure for official GDP), however, contracted 2.8% YoY in Sep'20, implying decline of 5% YoY in 2QFY21, following a 7.2% decrease a month ago. Notably, fiscal spending declined 37% YoY in Sep'20 (the worst decline in 18 months), dragging down economic growth significantly during the month. Excluding fiscal spending,...

Bandhan bank reported good operating performance during Q1FY21 with improvement in collection efficiency. Bottomline of the bank was impacted because the bank has accelerated additional provisioning on standard advances at Rs 750 cr in order to strengthen the balance sheet. With this additional provision buffer, the bank now holds total additional provision of Rs 1,769 cr, well beyond the RBI's prescribed limit. The bank has witnessed healthy business growth with advances growth at 18% YoY and deposit growth at 35% YoY. Marginal improvement seen on asset quality front as GNPA ratio fell by 5bps...

15 July 2020 Bandhan Bank has provided a high quantum of provisions toward COVID- 19, which affected earnings, even as NII/PPoP growth held strong. The bank now holds total COVID-19-related / excess standard provisions of INR17.7b (2.5% of loans) for use toward higher delinquencies once the moratorium period ends. Collection trends in the MFI portfolio are improving and stood at 73% (v/s 70% as of 3 Jul20). Deposit growth stood strong, with the CASA ratio improving further and retail deposit proportion being largely stable. Disbursements picked up in Jun20 and were largely lent to existing customers only. We expect credit cost trends to remain elevated at 2.4% for FY21E; the bank has already incurred ~1.2% of this in 1QFY21. 1QFY20 PAT stood at ~INR5.5b (32% YoY decline, 30% below estimates), affected by higher provisions at INR8.5b, including INR7.5b COVID-19 provisions (v/s INR6.9b last quarter).

The banking industry was at a cross roads during the year 2018-19. While it continued to support India's economic growth, it also grappled with challenges...

Bandhan management has indicated that collection efficiency in the MFI business has recovered to 55-60%, and it expects this to further improve to ~70% by Jun'20. The bank has indicated that collection trends in the housing/SME portfolio are currently similar to Apr'20 levels, however, an improvement is expected in the coming months. Bandhan is maintaining a cautious stance toward disbursements in 1HFY21 and is focused on improving collections trends. However, due to the COVID-19 crisis, credit cost is expected to rise to 1.5% in FY21E as the bank carries an additional provision buffer of INR10b INR6.9b made toward COVID; INR3.1b additional provisions on standard assets higher than regulatory requirement which forms ~1.5% of total loans. Given the current assessment based on customer feedback and collection trends, the 1.5% credit cost estimate would be sufficient to manage the current impact of the COVID crisis.

AUM growth of the merged entity was reported at 60.5% YoY to | 71846 crore (| 65456 crore in Q3FY19). Excluding Gruh Finance, loan growth was at ~20% YoY, a tad lower compared to the previous run rate. Healthy traction continued in micro finance segment (~64% of merged AUM) at 19.6% YoY to | 46189 crore while non-micro finance book growth came in at 22% YoY. Deposit accretion continued to remain healthy at 32% YoY to | 57082 crore as of FY20 and | 58030 crore as of April 30, 2020. Margin witnessed an uptick of ~20 bps QoQ to 8.1%. Growth in NII came at...

We remain watchful of asset quality and expect credit cost trends to remain elevated in the near term even though 4QFY20 PAT stood at ~INR5.2b (21% YoY decline, 17% below estimates), affected by higher provisions toward COVID-19 of INR6.9b. belongs to the Green zone; 16% to the Orange zone, and the rest to the The bank reported strong business growth numbers, with the mix of retail deposits improving further. 36% of borrowers have alternate businesses and therefore do not depend on a The bank has created the appropriate COVID-19 provisions based on multiple scenario analyses (such as impacted industry analysis; its prior experience of customer defaults; past events such as the Assam crisis, demonetization, and Bandhan maintains total provisions of INR10b, INR3.1b of which is put toward standard advances, while INR6.9b toward COVID-19-related issues. Total loans (on + off) grew 60.5%/9.8% YoY/QoQ to INR718.5b, driven by ~20%/15% YoY/QoQ growth in the MFI book; the non-micro credit book increased 22.3% YoY.

Bandhan Bank operates as a commercial bank which provides checking accounts, savings deposits and money market, mortgage and term loan services. It also offers card facilities and internet banking services. Bandhan...

Bandhan Bank operates as a commercial bank which provides checking accounts, savings deposits and money market, mortgage and term loan services. It also offers card facilities and internet banking services. Bandhan...

AUM growth of the merged entity came in at 83.8% YoY to | 65456 crore. Excluding Gruh Finance, loan growth was at 33% YoY, a tad lower compared to previous run rate. Traction in micro finance (~61% of merged AUM) was a tad lower compared to previous run rate at 30% YoY to | 40100 crore. Growth in non-micro finance book (excluding Gruh Finance) continued to remain strong at 54% YoY. Customer acquisition continued to remain healthy YoY as the bank added ~7.3 lakh in Q3FY20 (10 lakh customers in Q2FY20). Accordingly, total customer base was at 1.9 crore....

Bandhan Bank operates as a commercial bank which provides checking accounts, savings deposits and money market, mortgage and term loan services. It also offers card facilities and internet banking services. Bandhan...

Bandhan Bank was incorporated on December 23, 2014 as a wholly-owned subsidiary of Bandhan Financial Holding. Bandhan Financial Holding is owned by Bandhan Financial Services. Bandhan Bank received the in-principle approval of the Reserve Bank of India for setting up universal bank in April 2014. Bandhan began operations on August 23, 2015 when Bandhan Financial Services (BFSL), its parent company, transferred its entire microfinance business to them. Bandhan Bank started with 501 branches, 50 ATMs and 2,022 door step services centres on day one. Presently, Bandhan Bank has 3,948 touch points pan India consisting of 986 bank branches, 3014 door step services centres and...

Merged AUM grew 24% YoY to | 64186 crore. Excluding Gruh Finance, AUM growth came in at 38% YoY. Healthy traction continued in micro finance segment (~61% of merged AUM) at 35.3% YoY to | 39197 crore, while non-micro finance book (excluding Gruh Finance) growth came in at 53% YoY. Customer acquisition continued to remain healthy YoY as the bank added ~10 lakh customers. Accordingly, the total customer base was at 1.8 crore. Deposit accretion continued to remain healthy at 49.3% YoY to | 49195 crore. Growth has been witnessed across low cost as well as term...

Bank started the year with phenomenal Q1 performance. Net profit jumped 46%. Total deposits surged 42% with Asset growth at 39.36%. Moreover, NII grew by 36%; NIM's was higher at 10.45%. With decline in provisions, bank has also maintained stable asset quality (GNPA & NNPA stood at 2.02% & 0.56%). Further, has added 7.08 lakh customers during Q1 to reach a total customer base to 17.27 million (Micro Banking- 13.58 million and Non Micro 3.69 million). Booked `0.93 Billion in Q1, as Income from PSLC of...

Bandhan Bank operates as a commercial bank. It provides checking accounts, savings deposits and money market, mortgage and term loan services. It also offers card facilities and internet banking services. Bandhan...

resulted in CASA share reducing from 41% to 36% in one quarter itself. Many banks that have reported Q1 results have shown decline in CASA deposits. In our view, management will have to resort to branch expansion to keep up momentum of CASA deposits. Also, incremental loan growth is being driven by increase in the ticket size of the micro-loans which to some extent...

Bandhan Bank started financial year FY20 with an impressive set of numbers surpassing our estimates on all fronts. PAT during Q1FY20 grew by 46% yoy to Rs 701 cr vs. our estimate of Rs 591 cr, led by strong credit growth, stable margins and controlled cost. Loans (on book + off book) surged by 39% yoy while micro loans grew by 40%. Non-micro assets growth was at 36% yoy. Liabilities of the bank are gaining more traction with a deposit growth of 42% YoY. CASA ratio increased to 36.1% from 35.5% YoY, retail deposits to total deposits stood at 76.1%. Margins improved further from 10.3% to 10.5% YoY...

Bandhan Bank continued its growth traction with AUM growth of 39.4% YoY to | 45420 crore, driven by both micro (40% YoY) as well as non-micro loans (36% YoY). Steady customer acquisition at ~7.1 lakh and healthy growth in average ticket size to | 64000 led to AUM growth. Deposit accretion continued to stay healthy at 29% YoY to | 43701 crore. However, sequentially CASA saw de-growth while term deposit continued...