BANDHANBNK - Bandhan Bank Limited Share Price

In the earnings call for Q4FY25, Bandhan Bank's management outlined an optimistic outlook, projecting a gradual recovery in the microfinance sector amid ongoing challenges. Key points from the management include:

1. Performance Metrics: For FY25, the bank achieved a net interest income of INR 11,491 crore, up 11% YoY, and a profit after tax of INR 2,745 crore, which saw a significant 23% increase YoY. The bank's RoA was reported at 1.5% and RoE at 11.6%.

2. Advances and Deposits Growth: The advances book reached INR 1.37 lakh crore with a year-on-year growth of 10%, while deposits grew 12% YoY to INR 1.51 lakh crore. Retail term deposits increased robustly by 30%, highlighting stronger customer engagement.

3. Strategic Focus: Management emphasized a shift toward secured loans, aiming for secured advances to exceed 55% of total advances by FY27. The secured book grew by 32% YoY, improving the overall secured mix to 50.5%.

4. Target for Growth: The bank targets an advances CAGR of 15-17% over the next three years while prioritizing stable and granular retail deposits. The focus on maintaining a diverse funding mix aims to reduce reliance on bulk deposits, which currently constitute 31% of total deposits.

5. Asset Quality Improvement: Despite elated credit costs, management is optimistic about improving asset quality, with a target to reduce credit costs to 1.5-1.6% over 2-3 years, aided by effective risk management and improving trends in the MFI sector.

6. Operating Expenses: Management anticipates operating expenses to rise by 10-20 bps over the next two years due to ongoing investments in technology, human resources, and capabilities. However, they expect operational efficiencies to kick in thereafter.

7. Dividend Declaration: A dividend of INR 1.50 per share has been proposed, subject to shareholder approval.

Overall, the management conveyed a confident outlook, emphasizing strategic initiatives and operational improvements that position the bank favorably for future growth.

Earnings Call Q&A Summary

Question: What will be our proportion in Karnataka and Tamil Nadu as a percentage of advances?
Answer: Our share of advances in Tamil Nadu is less than 1%, while in Karnataka it's 1.1%. Both markets are negligible for us, and our collection efficiency there is around 97%. The regulations impacting these states do not apply to banks, so the overall impact on us is limited.

Question: Can you share the fixed book percentage?
Answer: Currently, around 55% of our loan book is fixed rate. This provides us with stability against interest rate fluctuations, ensuring that we can manage our liabilities effectively.

Question: What was the interest reversal this quarter compared to Q4FY24?
Answer: During the quarter, our interest reversal stood at INR 69 crores. I would love to provide a year-on-year comparison, but I'll have to get back to you with that figure.

Question: What sort of impact do we expect on our deposit cost after the recent rate cuts? Can you guide us on the cost of deposits for FY26?
Answer: We've reduced our interest rates on savings and term deposits, particularly from 8.05% to 7.75%. The impact on deposit costs won't be immediate but will be felt gradually as existing deposits mature. We expect an overall reduction in our deposit costs in the first half of FY26.

Question: Can you clarify the loan mix between MCLR and EBLR?
Answer: Out of our floating rate loans, 41% are EBLR-linked and around 5% are MCLR-linked. The rest are fixed rate loans, currently at 55% of our total portfolio.

Question: Of our MFI customers, what percentage paying anything on their EMIs?
Answer: From the 8% classified as GNPAs, about 25% are making payments. This indicates some level of recoverability within our GNPA book.

Question: What specific reasons contributed to the recent rise in our SMA-0 bucket in West Bengal?
Answer: The rise was due to recent holidays that affected repayment timing. However, the situation is stabilizing, and collection efficiencies are expected to return to normal.

Question: With regard to our EEB loan book, how do we project credit costs to evolve?
Answer: We anticipate an average credit cost of around 1.5% to 1.6% over the next 2 to 3 years. Our focus on tightening lending criteria and improving credit assessments should gradually reduce overall credit costs.

Question: Are we seeing localized overleverage issues in specific states?
Answer: Yes, localized challenges exist mainly in Maharashtra, Gujarat, and Tamil Nadu due to overleverage issues. However, the overall proportion of our loans in these areas is quite small.

Question: What level of EEB disbursement do we target for the current year?
Answer: We are targeting a net growth of INR 5,000 crores in our EEB portfolio for FY26. Our efforts will be concentrated on ensuring quality disbursements amid tighter control measures.

This concise summary encapsulates the major questions asked during the Q&A session along with detailed answers, ensuring that all key numbers and forward guidance are retained.