Bandhan Bank shares gain 1.5% after Q2 profit jumps over five-fold; Nomura cuts target, CLSA lowers price view

Provisions declined 38% year-on-year, supporting the improvement in profitability. Nomura maintained its 'Neutral' rating on Bandhan Bank but cut its target price to Rs 175 from Rs 190, valuing the lender at 0.9 times September 2028 estimated book value per share, against 1 time March 2028 estimated book value per share earlier. The brokerage said the bank reported second-quarter profit after tax of Rs 620 crore, up 24% quarter-on-quarter and 12% above its estimate.

Core pre-provision operating profit rose 14% quarter-on-quarter to Rs 1,520 crore, beating its estimate by 9%, driven by net interest income, fee income and lower operating expenses. Net interest income grew 1% quarter-on-quarter and 14% year-on-year, while calculated net interest margin increased 4 basis points sequentially to 5.83%. However, the CASA ratio declined 269 basis points quarter-on-quarter to 26.7% following the savings account rate recalibration.

Nomura flagged credit costs of 1.87%, slightly above its 1.80% estimate, as gross slippages edged up to 2.95%. It expects return on assets of around 1.2-1.4% and return on equity of 10-12% over FY27-29. CLSA cuts target price to Rs 195 CLSA maintained its 'Outperform' rating on Bandhan Bank but reduced its target price to Rs 195 per share from Rs 235. The brokerage said second-quarter profit beat estimates by 4%, while pre-provision operating profit exceeded expectations by 7%, partly offset by higher provisions.

Return on assets stood at 1.2%, supported by stronger fee income, while the bank's medium-term RoA target remains 1.6-1.7%. CLSA also noted that wholesale lending increased to 34% of loans, while microfinance institution (MFI) lending remained flat sequentially. Average CASA grew 4% year-on-year, and asset quality remained stable. Both brokerages flagged the potential impact of the transition to the expected credit loss (ECL) framework. Nomura estimates that the transition could increase the credit cost run rate by 15-20 basis points.