01-05-2022 12:57 PM | Source: Motilal Oswal Financial Services Ltd
Neutral Bandhan Bank Ltd For Target Rs.270 - Motilal Oswal
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Collection efficiency improves QoQ; business momentum picks up

Collection efficiency improves QoQ; business momentum picks up Bandhan Bank released its quarterly business update highlighting the trends for 3QFY22. Here are the key highlights:

* Gross advances (on book + off book + TLTRO investments) picked up sequentially by 9% QoQ (+~11% YoY) to INR892b. This is likely to have been supported by improved disbursements.

* The bank’s deposit base stood at INR845b, implying sequential growth of ~3% QoQ (+19% YoY). This was led by ~5% QoQ growth in CASA deposits (up ~26% YoY). Thus, the CASA ratio increased to 45.6% (v/s 44.6% in 2QFY22). The bank continues to report healthy trends in retail deposits, which were up 4% QoQ (~26% YoY). Thus, the proportion of retail deposits improved to ~84% (v/s ~81% in 3QFY21).

* On the asset quality front, collection efficiency (including NPAs, but excluding arrears) improved in the MFI portfolio to 91% in Dec’21 (v/s 86% in Sep’21 and 81% in 2QFY22). Collection efficiency in the Non-Micro portfolio stood at 98%. Thus, collection trends in the total portfolio stood at 93% (v/s 90% in Sep’21).

* As of 2QFY22, the GNPA/NNPA ratio stood at 10.8%/3.04%, with PCR of 74%. The total restructured book came in at INR83b (10.2% of total AUM), while the SMA overdue in the MFI portfolio was elevated at ~21% of total MFI loans. Overall, the bank holds additional provisions of INR24b (3.2% of loans).

Valuation and view:

Bandhan reported an uptick in business growth, supported by an improving environment, as collection efficiency also improved. However, movement in the SMA book and the performance of the restructured would be key monitorables. Overall, we remain watchful of asset quality and await further clarity given the rise in COVID cases. We maintain Neutral, with TP of INR270 (2.3x Sep’23E ABV).

 

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