Bandhan Bank: After three bad quarters, some good times have come for the investors of Bandhan Bank and this phase may continue. The bank has been able to improve significantly on several parameters related to growth in the March quarter. In this sense, FY22 will be much better than last year.
In its initial update for the fourth quarter of FY22 given to the exchange on April 5, Bandhan Bank said its loan growth in the March quarter stood at 16 per cent year-on-year. This is a significant improvement compared to the 9.6 per cent growth in the third quarter ended September 2021.
plan to reduce share of microfinance in loan book
Loan disbursement improved due to the removal of most restrictions implemented due to coronavirus in the country. Of course, the source of loan growth will be the key to tracking this. The microfinance business still accounts for more than half of Bandhan Bank’s loan book and the bank wants to reduce it to 30 per cent.
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This growth is widespread
Analysts see this as a massive growth with contributions from both microfinance and non-microfinance. In the December quarter, the microfinance book grew 22 per cent, housing loans grew 7 per cent and loans to small businesses grew 25 per cent.
There is a need for Bandhan Bank to diversify its loan business as micro loans have been a major source of irregularities during the pandemic. In the December quarter, 10 per cent of the lender’s loan book turned into bad loans. It also had to undertake a large number of loan restructurings to help the borrowers in difficult times.
Collection at pre-covid level
However, conditions look favorable for asset quality as economic activity picks up. According to the bank, the collection has reached the level before COVID.
Motilal Oswal Financial Services wrote in a note, “The improvement in collections should reduce credit cost and increase earnings.” The brokerage company expects 25 per cent growth in its returns by FY24.
A good deal
Now let us look at the recent acquisition of IDFC Asset Management Company (AMC) by Bandhan Financial Holdings Limited, the parent company of the bank. With the addition of an AMC, the group has moved closer to its goal of adding mutual funds and insurance businesses to its portfolio.
Jeffries India Pvt. Ltd. K analysts indicated that this is an opportunity for it to generate fee income through cross selling of mutual fund products.
Improvement in performance of Bandhan Bank has given investors an opportunity to buy in it. This is the reason that the bank has given a good return of 23 per cent in the last one month.
Shares of Bandhan Bank touched an all-time high of Rs 323 with a gain of nearly 2 per cent in intraday. The stock is trading marginally higher at Rs 316.60 at 3 pm.