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CE improves to 98%; loan growth expands sequentially

BANDHAN released its quarterly business update highlighting the key trends for 3QFY23:

* Gross advances (on and off the book and TLTRO investments) grew modestly at ~14% YoY but accelerated sequentially and rose 4.9% QoQ v/s 2.8% QoQ in 2QFY23 to ~INR1t fueled by a likely pick up in disbursements.

* The deposit base stood at INR1.02t, implying a sequential increase of 2.9% (+21.0% YoY), led by a 22%/11% QoQ increase in bulk/term deposits. CASA deposits declined 8% QoQ (-3.5% YoY) as customers maintaining savings balance of >INR20m shifted to term deposits that has been classified as Bulk deposits. CASA ratio thus moderated to 36.4% v/s 40.8% in 2QFY23.

* Trends in Retail deposits also remained modest (+2% QoQ and 3% YoY). The proportion of Retail deposits thus moderated to 69% (v/s 74% in 2QFY23). LCR ratio remained healthy at 155%.

* On the asset quality front, collection efficiency (excluding NPA) improved to 98% in MFI portfolio in Dec’22 (v/s 95% in Sep’22). Collection efficiency in the non-MFI portfolio was stable at 99%. Overall, collection trends in the total portfolio improved to 98% v/s 97% in Sep’22. Further, within the EEB segment, 0+ DPD (without CGFMU adjustment and technical write-off) in absolute amount dropped in Dec’22 v/s Sep’22.

* Valuation and view: BANDHAN has reported a stable 3QFY23 with a pick-up in advances growth and improvement in collection efficiency. Deposit growth was modest led by a sharp increase in bulk deposits while CASA ratio witnessed a decline as customers shifted their SA balance of >INR20m to term deposits. The management indicated that 0+ DPD in absolute terms improved and thus the movement in SMA book would be a key to assess the asset quality and credit cost trajectory.

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