BANDHANBNK - Bandhan Bank Limited Share Price

Management outlined a strategic outlook focused on transitioning Bandhan Bank into a digital universal bank while addressing near-term challenges. Key points include:

Strategic Initiatives:

1. Portfolio Diversification: Targeting 55%+ secured mix (home loans, gold loans, auto/CV/CE, MSME) by FY27, reducing reliance on microfinance (EEB). Current secured book rose to 49% (up from 42% FY24).
2. Deposit Growth: Prioritizing granular retail deposits (>69% retail share) over bulk deposits; deposits grew 20% YoY, outpacing advances (14% YoY).
3. Asset Quality: Elevated slippages in EEB (Rs 1,196 crore in Q3) led to credit costs of 4.1% (Q3) and 2.6% (9M). Technical write-offs (Rs 1,266 crore) improved PCR to 85%. Targeting credit costs ~2% near-term.
4. NIMs: Expect moderation (Q3: 6.9% vs 7.3% 9M) as secured mix grows but aims to offset via volume and efficiency.
5. Digital & Operational Efficiency: Launched Digital/Transaction Excellence Unit and Transformation Office to enhance tech adoption, customer experience, and cost optimization.

Outlook:

• EEB: Growth to moderate with stricter guardrails (e.g., 2+1 member rule, 30-day DPD checks).
• Geographical Diversification: Reduced East/Northeast exposure (39% vs 53% FY22).
• Profitability: Targeting ROA ~2% via controlled slippages, lower provision norms, and productivity gains.
• Asset Quality Stability: SMA-0 improvements signal early delinquency containment; collections to stabilize in H1FY26.

Management remains confident in executing Bandhan 2.0 despite near-term MFI stress, emphasizing prudent growth, risk governance, and sustainable returns.

Question 1: What are the Bank's targets for secured loan mix and the future share of EEB?
Bandhan Bank aims to increase the secured loan mix to 55%+ by FY27 by growing secured assets (housing, gold loans, etc.) faster than EEB. EEB will grow moderately, but its share will reduce due to higher growth in other segments. The focus is on diversification without reducing EEB's absolute value.

Question 2: How is the MFI disbursement trend expected in Q4?
Q4 disbursements will be more moderate than previous years due to portfolio controls and guardrails amid elevated risks. Renewals for quality borrowers will drive activity, but growth will remain calibrated to manage delinquencies.

Question 3: What is the outlook for MFI slippages and asset quality?
SMA-0 (early delinquencies) improved, but SMA-1/2 increased. Near-term slippages (Q4/Q1) may remain elevated due to industry stress but are expected to decline by FY26. Guardrails (stricter borrower checks, lower indebtedness caps) aim to stabilize asset quality.

Question 4: Will OPEX growth remain elevated?
OPEX growth (23% YoY excluding one-offs) reflects tech investments and talent acquisition. Growth will moderate over time as productivity improves, though tech spending will continue to align with digital transformation goals.

Question 5: What is the average maturity and yield of the EEB portfolio?
EEB loans average 18 months, with disbursement yields at ~23%. Portfolio yield is ~20.3%. Guardrails may pressure yields, but the Bank prioritizes risk-adjusted returns over high NIMs.

Question 6: How will shifting to secured loans impact credit costs?
Secured loans have lower loss rates, but near-term credit costs (~2% in FY25) hinge on resolving MFI stress. By FY27, credit costs are projected at 1.5"“1.6% as secured loans dominate and slippages normalize.

Question 7: Why did collection efficiency dip in Q3?
Efficiency dipped marginally (97.6% vs. 98.2% in Q2) due to stress in non-EEB segments outside Bengal/Assam. January trends show improvement, with SMA-0 reductions signaling stabilization.

Question 8: How does the Karnataka ordinance impact the Bank?
Karnataka's portfolio is minimal (Rs.740 crore, 13% delinquent). The Bank expects limited impact as it adheres to regulations and prioritizes portfolio protection.

Question 9: What were EEB slippages in Q3 vs. Q2?
EEB slippages rose to Rs.1,196 crore in Q3 (vs. Rs.752 crore in Q2) due to industry stress. SMA-1/2 increases signal near-term risks, but SMA-0 declines suggest delinquency pressures easing.

Question 10: Has Stage 3 (NPA) peaked?
Stage 3 may rise slightly in Q4 as SMA-1/2 loans degrade, but FY26 should see stabilization. Credit costs guided at ~2% for FY25, improving as secured loans expand and MFI stress recedes.