Bandhan Bank shares plunge 7% post weak Q2; brokerages cut earnings estimates

Shares of Bandhan Bank Ltd fell 6.72 per cent in Friday's trade to hit a low of Rs 159.05, after the private lender reported a disappointing performance for the September quarter (Q2 FY26). The results led to sharp cuts in earnings estimates and target prices, as brokerages highlighted an all-round miss across key parameters, including margins, provisions and profitability.

A few brokerages described Bandhan Bank's quarterly performance as among the weakest in the sector, marked by a steep decline in net interest margin (NIM) and elevated credit costs.

Motilal Oswal Financial Services Ltd (MOFSL) said the bank's results reflected a broad-based miss, driven by higher-than-expected provisions, weaker other income and a 55 basis points (bps) quarter-on-quarter (QoQ) decline in NIMs. The margin compression was attributed to a 200 bps reduction in MCLR and the full pass-through of the 75 bps repo rate cut.

Loan growth stood at 7 per cent year-on-year (YoY), with continued contraction in the microfinance (MFI) portfolio. The share of the MFI segment in the overall book declined to 37 per cent. MOFSL expects some improvement in margins from the fourth quarter onwards, aided by lower deposit costs and a shift toward a secured lending book.

However, it cautioned that MFI slippages could persist for another two to three months. The brokerage cut its FY26 earnings estimate by 34 per cent and FY27 estimate by 17 per cent, assigning a target price of Rs 175 and maintaining a 'Neutral' stance.

Nuvama Institutional Equities said Bandhan's results were significantly below consensus, with NIM 8 per cent lower, pre-provision operating profit (PPOP) down 16 per cent, and profit after tax (PAT) down 66 per cent compared to Street estimates.

Sequentially, PAT declined 70 per cent, while asset quality worsened with elevated slippages in both EEB and housing portfolios. The firm slashed its earnings per share (EPS) estimates and reduced the target price to Rs 155 (0.9x BVFY26E) from Rs 185, downgrading the stock to 'Reduce' from 'Hold'.

Nuvama noted that Bandhan's PPOP margin fell to 2.7 per cent, leaving little buffer for further shocks, while slippages rose even as peers saw improvement.