Bandhan Bank Q2, weakest among peers, triggers target price cuts

Bandhan Bank’s September-quarter results triggered sharp cuts in earnings estimates and target prices, as analysts flagged an all-round miss across key parameters. The bank’s performance was among the weakest in the sector, marked by a steep decline in net interest margin and elevated credit costs. One brokerage noted that if not for lower operating expenses, the lender could have reported a loss for the quarter.

"In our view, the stock will see an overhang in the near-to-medium term due to the following reasons: 1) Asset quality of the EEB (Emerging Entrepreneurs Business) portfolio will be a key watch. 2) Margins will be under pressure due to lower loan growth, business mix change toward secured assets, and cut in lending rates. We maintain ‘HOLD’ on the stock," Nirmal Bang said.

Bandhan Bank shares are up 6 per cent in 2025 so far against 13.65 per cent rise in the Nifty Bank during the same period.

Nuvama Institutional Equities noted that compared to consensus, net interest margin (NIM) was 8 per cent lower, PPOP 16 per cent and PAT 66 per cent lower than Street estimates. PAT was down 70 per cent sequentially, with asset quality deteriorating and slippage remaining elevated in EEB. Slippages also rose in housing and unsecured BB, with the bank taking a big EEB technical write-off for the quarter.

"We are slashing EPS and lowering target to Rs 155/0.9x BVFY26E from Rs 185. Downgrade to ‘Reduce’ (from ‘Hold’) with a sharper-than-peers’ NIM decline and rising slippage versus improvement for peers. PPOP margin crashed to 2.7 per cent leaving limited room for future shocks.

MOFSL said Bandhan Bank reported a weak quarter with an all-around miss, driven by higher-than-expected provisions, lower other income, and a sharp 55 basis points QoQ moderation in margins due to a 200bp MCLR cut and the full pass-through of the 75 bps repo rate cut. 

"Loan growth was 7 per cent YoY as the MFI book continues to decline, with the segment mix also reducing to 37 per cent. With reduced SA funding costs and moderation in TD rates upon renewal, NIMs are expected to expand, especially from 4Q onwards, aided by the bank’s shift toward a secured book. However, MFI slippages are expected to continue for the next 2-3 months, and the full guardrail is taking longer than expected," it said. 
This brokerage cut its earnings estimates by 34 per cent for FY26 and 17 per cent for FY27 and suggested a target of Rs 175 on the stock.