Why Bandhan Bank shares fell 14% | Macquarie target at Rs 130; JPMorgan, CLSA, Jefferies targets 

Bandhan Bank Ltd shares fell 14 per cent in Wednesday's trade  after higher staff costs and provisions led to a sharp miss on June quarter net profit. Investor sentiment weakened further after the management lowered its FY27 exit return on assets (RoA) guidance to 1.2-1.4 per cent from 1.6-1.8 per cent, citing lower margins and higher operating expenses.

"We believe earnings recovery is likely to be slower than earlier anticipated as margin expansion and operating leverage benefits get pushed out," JM Financial said. 

The Bandhan Bank stock fell 14.3 per cent to hit a low of Rs 178.75 apiece on BSE. The bank management indicated that external factors such as volatile geopolitical environment, below-normal monsoon rainfall, tighter liquidity conditions may result in elevated cost of funds and higher tech expenses in the near-term. 

Among the 15 brokerages that updated their views following the Q1 results, Macquarie retained the lowest target price of Rs 130. Anand Rathi and Ambit Capital maintained 'Sell' ratings with targets of Rs 146 and Rs 150, respectively.
Ashika Stock Broking assigned Rs 260 target on the stock, the highest target assigned to the stock after the Q1 results so far.

Among brokerages, Jefferies reiterated its 'Buy' rating and raised its target price to Rs 240 from Rs 215. CLSA recommended 'Accumulate' with a target of Rs 235, while UBS and JPMorgan maintained 'Neutral' ratings with targets of Rs 200 and Rs 175, respectively.

"We believe Bandhan's MFI recovery and normalising credit cost story remains on track. However, higher funding costs amid West-Asia conflict and ongoing portfolio shift towards secured retail and corporate lending are likely to weigh on margins despite improving long-term risk-adjusted returns. Hence, we are cutting FY27–29E earnings estimates by 11–14 per cent and expect the bank’s RoA trajectory to be gradual at 1.2%/1.4%/1.6% over FY27E/28E/29E," Nuvama said.

This brokerage downgraded the stock to ‘Hold’ from ‘Buy’, with a revised target of Rs 230 from Rs 250 earlier. 

JM Financial cut it earnings estimates by 2–3 per cent for FY27 and FY28 but upped it target to Rs 220 from Rs 200, led by rollover of multiple, valuing the stock at 1.2 times FY28 book value.

SBI Securities called Bandhan Bank's results healthy, led by strong advances growth, stable margins and improving credit costs despite seasonality pressures. Margins remained stable sequentially despite elevated cost of borrowings, it said adding that Asset quality remained stable sequentially, driven by credit costs moderation, underpinned by lower stress formation. 

"However, management has slashed FY27-exit RoA guidance by 40 bps. Elevated cost of funds and tech costs are expected to weigh on profitability amid external uncertainties. Further, the trend of the southwest monsoon  would be a key monitorable. The bank is trading at a relatively cheaper valuation. We have an open call on Bandhan Bank in our Pick of the Day with a price target of Rs 229," the brokerage said.

MOFSL has cut its FY27 and FY28 earnings estimates by 14 per cent and 6 per cent and expects Bandhan Bank to deliver an RoA of 1 per cent in FY27 and 1.4 per cent in FY28. 

"We downgrade the stock to Neutral while retaining our target of Rs 225," MOFSL said.