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NII, PPoP in line; cuts FY27 exit-RoA guidance by 40bp Controlled provisions drive earnings beat

* Bandhan Bank (BANDHAN) reported a 1QFY27 PAT of INR5.0b (up 35% YoY, down 6% QoQ; 9% beat) led by lower-than-expected provisioning.

* NII grew 6% YoY to INR29.2b (in line). The NIM was flat QoQ at 6.2% with some moderation in CoF (down 10bp QoQ), while yields remained flat.

* Net advances grew by 18.0% YoY (up 1.1% QoQ), led by 27% YoY growth in the non-EEB book. Deposits grew 6.6% YoY/dipped 0.9% QoQ as management chose to reduce bulk deposits. CD ratio increased to 92%.

* Fresh slippages increased to INR10.8b from INR10.3b in 4QFY26. GNPA ratio improved 12bp QoQ to 3.15%, while NNPA improved 4bp QoQ to 0.93%. The PCR ratio was stable at 71.1%. * RoA guidance of 1.6-1.8% by the exit of 4QFY27 has been cut to 1.2%- 1.4% on the back of uncertain global macros and higher competitive intensity in deposit pricing, a combination of which is expected to have an adverse impact of 30bp on NIMs and 10bp on opex.

* We cut our FY27/FY28 earnings estimates by ~14%/6% and expect BANDHAN to deliver an RoA of 1.0%/1.4% in FY27/FY28. We downgrade the stock to Neutral while retaining our TP of INR225 (premised on 1.3x Mar’28E ABV).

Margins flat QoQ; cost of funds likely to increase

* The bank’s 1Q PAT stood at INR5.0b (up 35% YoY, down 6% QoQ, 9% beat), driven by lower-than-expected provisioning.

* NII grew to INR29.2b (4.5% QoQ) as NIMs remained flat QoQ at 6.2%, aided by a 10bp decline in CoF and flat yields on advances. Management expects NIM to be under pressure going forward on account of elevated deposit pricing translating to higher CoF.

* Other income was down 22% QoQ/17% QoQ to INR6.0b (in-line), owing to softer treasury income and relatively lower business growth.

* Opex rose 1.9% QoQ to INR21.7b (in line), owing to one non-recurring cost of INR0.6b of gratuity provisioning, coupled with higher IT and annual employee increment-related costs. The C/I ratio rose to 61.5%.

* Gross advances grew 16% YoY/0.8% QoQ to INR1.56t. The non-EEB book grew 27% YoY/2.6% QoQ and now constitutes 66% of advances. The EEB book declined 2.4% QoQ, with management expected to remain calibrated in the near term owing to an uncertain external environment.

* Deposits grew 7% YoY/down 0.9% QoQ to INR1.65t, with CASA ratio improving 9bp QoQ to 29.4%, as strong SA growth was offset by weaker growth in CA. CASA + Retail deposits now form 74% of total deposits.

* GNPA ratio improved 12bp QoQ to 3.15%, while NNPA improved to 0.93%. PCR stood at 71.1%. Fresh slippages rose marginally to INR10.8b, with seasonality in 1Q, more holidays in the month of Apr’26, and state elections. The credit costs declined to 1.8% from 2.0% in 4QFY26.

Valuation and view

* Bandhan reported a steady quarter, led by a gradual improvement in credit costs to 1.8% (vs. 2.0% in 4Q). Business momentum was relatively soft, with growth largely led by the non-EEB portfolio. Management expects loan growth to remain at 14% YoY, with EEB book growth expected to be between 5% and 10%. NIM is flat at 6.2%, and it is guided to remain under pressure owing to higher deposit pricing. On asset quality, management expects the recovery run rate to remain healthy, with slippages being contained, and it has guided credit costs of ~1.6-1.8% in FY27. Management has cut its RoA guidance to 1.2-1.4% for the 4QFY27 exit, expecting adverse pressure on NIMs and opex owing to uncertain external factors and higher competitive intensity on deposits.

* We cut our FY27/FY28 earnings estimates by ~14%/6% and expect BANDHAN to deliver an RoA of 1.0%/1.4% in FY27/FY28. We downgrade the stock to Neutral while retaining our TP of INR225 (premised on 1.3x Mar’28E ABV)

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