Bandhan Bank Shares Hit 52-Week Low Amid Weak Q3FY25 Performance
Shares of Bandhan Bank dropped to a 52-week low of Rs 153.85, falling by 2.4% on the BSE during Tuesday’s intra-day trade. This marked the second consecutive day of decline, with the stock now trading below its previous low of Rs 157.10, which it had touched on December 20, 2024. The stock has now fallen 42% from its 52-week high of Rs 263 reached on January 5, 2024.
The stock’s decline is attributed to the weak performance for the quarter ended December 2024 (Q3FY25), with several key issues affecting the bank’s operations.
Key Concerns from Q3FY25 Report:
- Deteriorating Collection Efficiency: Bandhan Bank’s collection efficiency declined by 60 bps quarter-on-quarter (QoQ), falling to 97.6% from 98.2% in Q2FY25, highlighting concerns over asset quality and increasing credit costs.
- Limited Loan Growth: Growth in advances remained limited at 15% YoY and 2% QoQ, totaling Rs 1.3 trillion. The microfinance segment, a key area for the bank, continues to face challenges.
- Deposits and CASA Decline: The bank witnessed a sequential de-growth in CASA and overall deposits, falling 20.1% YoY and 1.1% QoQ, amounting to Rs 1.4 trillion. This indicates difficulties in mobilizing liabilities.
- Rising NPAs: As of September 30, 2024, the bank’s gross NPA (GNPA) and net NPA (NNPA) increased to 4.7% and 1.3%, respectively, compared to 3.8% and 1.1% as of March 31, 2024. The bank anticipates slippages to remain high in Q3 before improving in Q4.
- Microfinance Sector Challenges: Bandhan Bank has faced challenges in the microfinance sector due to overleveraging, elevated pricing, and operational disturbances, exacerbated by socio-political factors such as elections, heatwaves, and the “Karza Mukt Bharat Abhiyan” campaign.
Corrective Measures:
The bank has been proactive in addressing risks associated with its microfinance business by tightening eligibility criteria for refinancing, enforcing stricter credit scores, and investing in technology to improve operational efficiency. These measures are expected to provide long-term benefits but may not fully mitigate the challenges in the near-to-medium term.
Sector-Wide Risks:
Bandhan Bank’s performance is also reflective of broader issues within the microfinance sector, which has been plagued by regulatory and socio-political disruptions. Past events, such as the Andhra Pradesh crisis (2010), demonetization (2016), and the pandemic (2020), have highlighted the vulnerability of the borrower segment to external factors, impacting growth, asset quality, and profitability.
Outlook:
Analysts remain cautious about the bank’s short-term outlook, especially given the continuing difficulties in the microfinance segment. The market will closely monitor the bank’s asset quality and credit costs in the coming quarters. Despite corrective measures, the sector-specific challenges, particularly in the microfinance space, will likely remain a significant monitorable.
