15 July 2020
1QFY21 Results Update | Sector: Financials
Bandhan Bank
Estimate change
TP change
Rating change
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2020 for India
Research, Sales and Trading team. We
request your ballot.
CMP: INR350
TP: INR425 (+22%)
Buy
Collection trends improve steadily
Liability franchise strong; Prudential provisions to aid earnings
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
BANDHAN IN
1,610
563 / 7.6
650 / 152
22/-15/-29
2440
Bandhan Bank has provided a high quantum of provisions toward COVID-
19, which affected earnings, even as NII/PPoP growth held strong. The
bank now holds total COVID-19-related / excess standard provisions of
INR17.7b (2.5% of loans) for use toward higher delinquencies once the
moratorium period ends. Collection trends in the MFI portfolio are
improving and stood at 73% (v/s 70% as of 3
rd
Jul’20).
Deposit growth stood strong, with the CASA ratio improving further and
retail deposit proportion being largely stable. Disbursements picked up in
Jun’20 and were largely lent to existing customers only. We expect credit
cost trends to remain elevated at 2.4% for FY21E; the bank has already
incurred ~1.2% of this in 1QFY21.
Maintain Buy.
Financials & Valuations (INR b)
Y/E March
FY20 FY21E
NII
63.2
75.7
OP
54.5
65.0
NP
30.2
35.4
NIM (%)
9.1
8.2
EPS (INR)
21.6
22.0
EPS Gr. (%)
31.9
1.9
BV/Sh. (INR)
94
117
ABV/Sh. (INR)
93
114
RoE (%)
22.9
20.8
RoA (%)
4.1
3.6
Payout (%)
0.0
21.4
Valuations
P/E(X)
16.2
15.9
P/BV (X)
3.7
3.0
P/ABV (X)
3.8
3.1
Shareholding pattern (%)
As On
Jun-20 Mar-20
Promoter
61.0
61.0
DII
8.0
8.8
FII
14.5
13.1
Others
16.6
17.2
FII Includes depository receipts
FY22E
88.9
76.0
45.7
8.3
28.4
29.0
140
137
22.1
3.9
20.7
12.3
2.5
2.6
COVID-19 provisions drag down earnings; provision coverage
strengthens
Jun-19
82.3
9.5
6.3
2.0
1QFY20 PAT stood at ~INR5.5b (32% YoY decline, 30% below estimates),
affected by higher provisions at INR8.5b, including INR7.5b COVID-19
provisions (v/s INR6.9b last quarter). Thus, Bandhan holds total
additional provisions of INR17.7b (INR14.4b toward COVID-19 and
INR3.4b excess standard provisions).
NII grew 15% YoY (~8% QoQ) to INR18.1b, with NIMs improving 2bp QoQ
to 8.15%. Other income grew 17% YoY to INR5.9b, including PSLC income
of INR1.2b amortized during the quarter. Opex grew at 12% YoY to
INR6.1b; thus, the C/I ratio moderated ~230bp QoQ to 27.9%. Overall,
PPoP grew at 17% YoY to INR15.8b (7% beat).
Advances (on + off book) grew at ~17.7% YoY (3.5% QoQ), with MFI loans
increasing at 21.2% YoY (2.8% QoQ). Thus, the MFI portfolio forms 64%
of the total AUM. Disbursements in MFI in Jun’20 were back at ~70% of
pre-COVID-19 levels (Jun’19), largely toward existing borrowers.
Bandhan continues to report strong deposit growth at 35% YoY / 6% QoQ
to INR606b, led by an increase in CASA deposits at 47% YoY / 7% QoQ to
~INR225b. Thus, the CASA ratio improved to 37.1% v/s 36.8% in FY20.
Overall, the proportion of retail deposits stood stable at ~78%.
On the asset quality front,
absolute GNPL increased 1.4% QoQ, while
accelerated provisions led to ~14% QoQ decline in NNPL. Consequently,
the GNPA/NNPA ratio declined 5bp/10bp QoQ to ~1.4%/0.5%. Thus, PCR
improved to 66.6% v/s 60.8% in FY20.
Collection efficiency:
In the MFI portfolio, collection efficiency
improved to ~73% (v/s 70% in Jun’20). Overall, collection efficiency in the
total portfolio improved to 76% in Jun’20 v/s 29% in Apr’20.
State-wise collection trends:
Bihar has the highest collection efficiency,
while Maharashtra and Tamil Nadu have the lowest collection trends.
Highlights from management commentary
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020
 Motilal Oswal Financial Services
Bandhan Bank
Management guided credit cost at 2.0–2.2% for FY21E; however, a large
proportion has already been incurred by making additional contingent
provisions.
In the Mortgage portfolio, marginal deterioration is witnessed in the LAP
portfolio.
Valuation and view
As economic activity staggers to a start in India, we are seeing steady improvement
in collection trends. Bandhan’s collection efficiency in the MFI portfolio has
improved to ~73%; at the overall portfolio level, it has improved to ~76%. Thus, the
incidence of moratorium availed has been declining. Furthermore, the bank holds
INR17.7b total COVID-19-related / excess standard provisions (2.5% of loans) to
manage higher delinquencies over 2HFY21. We maintain a Buy rating, with revised
TP of INR425 (3.0x FY22E BV).
Quarterly performance
Y/E March
Net Interest Income
% Change (YoY)
Other Income
Total Income
Operating Expenses
Operating Profit
% Change (YoY)
Other Provisions
Profit Before Tax
Tax
Net Profit
% Change (YoY)
Operating Parameters
Deposits (INR b)
Loans (INR b)
Deposit Growth (%)
Loan Growth (%)
Asset Quality
Gross NPA (%)
Net NPA (%)
PCR (%)
E:MOFSL Estimates
1Q
15,746
51.8
3,310
19,056
5,505
13,551
65.1
1,254
12,297
4,261
8,036
66.8
448
415
42.3
35.9
1.7
0.6
65.9
FY20
2Q
3Q
15,290 15,403
41.9
37.0
3,603
3,577
18,893 18,980
5,824
6,341
13,069 12,639
49.5
40.4
1,455
2,949
11,614
9,690
1,896
2,380
9,718
7,310
99.3
120.7
492
598
49.3
88.4
1.8
0.6
68.3
549
606
58.5
78.9
1.9
0.8
58.4
4Q
16,800
33.6
5,002
21,802
6,595
15,207
31.9
8,274
6,933
1,760
5,173
-20.5
571
666
32.0
68.1
1.5
0.6
60.8
1Q
18,115
15.0
3,868
21,983
6,141
15,842
16.9
8,491
7,351
1,853
5,498
-31.6
606
697
35.3
68.1
1.4
0.5
66.6
FY21E
2QE
3QE
18,310 19,294
19.7
25.3
4,477
4,586
22,787 23,880
6,999
7,402
15,789 16,478
20.8
30.4
3,535
4,065
12,254 12,413
3,088
3,128
9,166
9,285
-5.7
27.0
628
721
27.6
20.5
1.8
0.6
67.0
653
735
18.9
21.3
2.7
1.1
62.0
FY20
4QE
19,943
18.7
5,195
25,138
8,259
16,879
11.0
1,584
15,295
3,854
11,441
121.2
685
765
20.0
14.8
3.1
1.2
63.1
63,239
40.7
15,492
78,731
24,265
54,466
45.3
13,932
40,534
10,297
30,237
54.9
571
666
32.0
68.1
1.5
0.6
60.8
FY21E
75,662
19.6
18,126
93,787
28,801
64,987
19.3
17,675
47,312
11,923
35,389
17.0
685
765
20.0
14.8
3.1
1.2
63.1
(INR m)
FY21E V/S our
1QE
Est
17,312
5%
9.9
4,260
-9%
21,571
2%
6,835
-10%
14,737
7%
8.8
4,223
101%
10,513
-30%
2,649
-30%
7,864
-30%
-2.1
606
686
38.7
65.4
1.5
0.6
61.0
0%
2%
-2
-276
6
11
-564
15 July 2020
2
 Motilal Oswal Financial Services
Bandhan Bank
Quarterly snapshot
FY19
1Q
Profit and Loss, INR m
Interest Income
Loans
Investment
Others
Interest Expenses
Net Interest Income
Other Income
Total Income
Operating Expenses
Employee
Others
Operating Profits
Core Operating Profits
Provisions
PBT
Taxes
PAT
Balance Sheet, INR b
Deposits
Loans
Asset Quality, INR m
GNPA
NNPA
15,562
12,981
1,509
1,072
5,190
10,372
2,107
12,479
4,273
2,489
1,785
8,205
8,205
800
7,405
2,588
4,817
307
305
3,883
1,924
2Q
16,056
13,998
1,594
464
5,282
10,775
2,304
13,079
4,339
2,342
1,997
8,740
8,740
1,242
7,498
2,622
4,877
330
317
4,133
2,204
3Q
16,496
14,356
1,513
627
5,256
11,240
2,341
13,581
4,576
2,558
2,019
9,005
9,005
3,776
5,228
1,916
3,313
346
339
8,310
2,367
4Q
18,327
15,938
1,555
834
5,752
12,575
3,878
16,453
4,921
2,699
2,222
11,532
11,532
1,533
9,999
3,491
6,509
432
396
8,196
2,283
1Q
26,313
22,817
1,902
1,594
10,567
15,746
3,310
19,056
5,505
3,318
2,187
13,551
13,551
1,254
12,297
4,261
8,036
448
415
10,197
3,475
2Q
26,903
23,702
1,955
1,246
11,612
15,290
3,603
18,893
5,824
3,327
2,497
13,069
13,069
1,455
11,614
1,896
9,718
492
598
10,642
3,369
FY20
3Q
27,176
23,711
2,006
1,459
11,774
15,403
3,577
18,980
6,341
3,405
2,936
12,639
12,639
2,949
9,690
2,380
7,310
549
606
11,820
4,914
4Q
28,463
24,632
2,465
1,365
11,663
16,800
5,002
21,802
6,595
3,621
2,975
15,207
15,207
8,274
6,933
1,760
5,173
571
666
9,928
3,894
FY21
1Q
30,181
26,220
2,292
1,669
12,066
18,115
3,868
21,983
6,141
3,894
2,247
15,842
15,842
8,491
7,351
1,853
5,498
606
697
10,067
3,358
Change (%)
YoY
QoQ
15
15
21
5
14
15
17
15
12
17
3
17
17
577
-40
-57
-32
35
68
-1
-3
6
6
-7
22
3
8
-23
1
-7
8
-24
4
4
3
6
5
6
6
5
1
-14
Quarterly snapshot contd.
Ratios (%)
- Asset Quality Ratios
GNPA (%)
NNPA (%)
PCR (Cal. %)
- Business Ratios
Cost to Core Income
Tax Rate
CASA (%)
Loan/Deposit
- Profitability Ratios
ROA
ROE
Yield
Cost of Funds
Margins
Other Details
Branches
ATM
FY19
1Q
1.3
0.6
50.4
34.2
34.9
35.5
99.4
4.5
19.9
15.4
6.5
10.3
937
475
2Q
1.3
0.7
46.7
33.2
35.0
36.9
96.3
4.3
19.3
15.3
6.3
10.3
938
476
3Q
2.4
0.7
71.5
33.7
36.6
41.4
97.8
2.9
12.5
15.4
6.3
10.5
978
480
4Q
2.0
0.6
72.1
29.9
34.9
40.8
91.7
5.2
24.1
15.6
6.1
10.7
986
481
1Q
1.7
0.6
65.9
28.9
34.6
36.1
94.9
4.9
24.4
15.7
6.6
10.5
999
481
2Q
1.8
0.6
68.3
30.8
16.3
32.9
121.5
4.8
28.3
14.2
7.2
8.2
1,000
485
FY20
3Q
1.9
0.8
58.4
33.4
24.6
34.3
110.4
3.5
20.0
14.0
7.2
7.9
1,009
485
4Q
1.5
0.6
60.8
30.3
25.4
36.8
116.7
2.4
13.7
13.8
6.7
8.1
1,018
485
FY20
1Q
1.4
0.5
66.6
27.9
25.2
37.1
115.1
2.3
14.1
13.6
6.4
8.2
1,018
485
Change (bps)
YoY
QoQ
-27
-5
-11
-10
72
587
-95
-944
102
2,015
-259
-1,033
-210
-20
-230
19
4
-232
-18
24
-165
-10
40
-20
-30
2
0
0
15 July 2020
3
 Motilal Oswal Financial Services
Bandhan Bank
Highlights from management commentary
Collection trends
Challenges remain widespread for the industry, which is dealing with the COVID-
19 crisis, floods/cyclones in Assam and West Bengal, etc. Despite these
concerns,
collection trends have been improving steadily and recovered to
~73% v/s 70% as of 3
rd
Jul’20.
If no further lockdown is announced, collection trends would continue to improve.
In terms of state-wise collection trends,
Bihar and Telangana have the highest
collection efficiency, while Maharashtra and Tamil Nadu the lowest collection
trends. Collection efficiency in Maharashtra is at ~54%.
Disbursements made in June were largely toward ~5% of existing borrowers
with avg. ticket sizes of top-up loans at ~INR35k.
Furthermore, the bank
disbursed loans for new business activity in sectors such as Retail, Food
Processing, and Agri-related.
Collection efficiency in terms of proportion of borrowers is at 68%; it stands at
~70% in terms of billing collection (for the month).
~30% of customers have not paid even a single installment.
In terms of incremental opportunities,
30–35% of existing borrowers have loans
with one or more lenders.
Thus, the bank expects to tap these customers by
proving top-up loans and become the sole lender.
In the Small Enterprise Loans portfolio, unsecured loans stand at INR20b.
The opex-to-asset ratio has already hit the bottom level, and not much
improvement is expected from current levels.
PSLC income during the quarter was INR1.19b (INR4.7b for the full year).
Guidance:
The new customer acquisition rate would slow to 10% YoY for FY21E;
the bank would focus on providing loans to existing customers only.
Bandhan has reduced the center meetings’ size to lower the probability of infection.
The bank is providing top-up loans at 100bp higher than the usual interest
rate.
50% of borrowers in MFI have ticket sizes of ~INR150k, while 14% have ticket
sizes of INR100–150k. The remaining 35% of borrowers have ticket sizes of
INR50–100k.
More than 50% of incremental disbursements in the Mortgage portfolio are
toward new customers, while the bank has also purchased loans under IBPC.
BANDHAN has made additional provisions of INR7.5b during the quarter; thus,
the total contingent provision buffer (including COVID-19-related and additional
standard asset provisions) stood at INR17.7b.
Overall, expect credit cost of 2.0–2.2% for FY21E. However, a large proportion
has already been incurred by making contingent provisions.
~75% of COVID-19-related provisions are toward the MFI portfolio.
In the Mortgage portfolio, a marginal increase is witnessed in GNPAs, primarily
from the LAP portfolio. Furthermore, although moratorium availed has
increased in value terms, it has reduced by 20% in terms of the number of
borrowers v/s Apr’20.
Balance sheet and P&L related
Asset quality
15 July 2020
4
 Motilal Oswal Financial Services
Bandhan Bank
Key exhibits
Healthy traction in deposits continues; margins expand to 8.15%
CASA mix increased to
37.1% (+24bp) QoQ
Deposits grew 35% YoY / 6% QoQ to INR606.1b, within which term deposits rose
~36% YoY and CASA deposits ~47% YoY (+6.9% QoQ). The CASA mix increased
~24bp QoQ to 37.1% v/s 36.8% in 4QFY20. Retail deposits constitute ~77.7% of
the total deposits.
NIMs expanded marginally by 2bp QoQ to 8.15% on moderation in cost of
deposits at 6.4% (-30 QoQ).
AUM grows 17.7% YoY, with MFI book increasing at ~21% YoY
AUM grew ~18% YoY,
within which the MFI book
grew ~21% YoY and non-
micro credit ~12% YoY
Total loans (on + off) grew 17.7% YoY / 3.5% QoQ to INR743.3b, driven by ~21%
YoY / 3% QoQ growth in the MFI book. On the other hand, the non-micro credit
book grew 11.9% YoY. The MFI book now constitutes ~64% YoY of the total
AUM, while the Mortgage book forms 26%.
Within micro-finance, the number of active borrowers grew ~14% YoY to 11.2m,
while disbursements moderated to INR31.1b (-75% YoY / -84% QoQ).
Within GRUH loans, ~55% of the book is toward salaried customers, with an
average LTV of ~67%.
Exhibit 2: Active MFI borrowers grew 14% YoY to 11.2m
No of total active micro borrowers (m)
Exhibit 1: MFI book forms 64% and Mortgage ~26%
Micro loans (%)
Non-Micro Credit (%)
Source: MOFSL, Company
Source: MOFSL, Company
Asset quality ratios improve sequentially; PCR improves ~590bp QoQ
Absolute GNPA increased 1.4% QoQ to INR10b, while NNPA declined ~14% QoQ
to INR3.4b. The GNPA/NNPA ratio declined 5bp/10bp QoQ to 1.43%/0.48%.
Calculated PCR thus improved to 66.6% (+587bp QoQ).
The bank has created COVID-19-related provisions of INR7.5b and holds a total
contingent provision of INR14.4b toward COVID-19 (2.1% of total advances).
Segmental GNPA:
MFI GNPA declined 1% QoQ to INR2.1b; GNPA for Mortgage
fell 8% QoQ to INR2.7b. Non-micro GNP stood at INR5.32b (of which INR3.85
pertains to ILFS).
Update on moratorium/collections
MFI:
Collection efficiency had recovered to ~68% as of Jun’20 (~70% as of 3
rd
Jul’20) in value terms, v/s nil in Apr’20.
Mortgage:
Collection efficiency in the Mortgage portfolio improved to 85% in
Jun’20 v/s 87% in Apr’20.
15 July 2020
5
 Motilal Oswal Financial Services
Bandhan Bank
SME:
Collection efficiency improved to 82% in Jun’20 v/s 65% in Apr’20.
NBFC:
(a) NBFC Others – 100% collections, (b) NBFC MFI – collection efficiency
improved to 100% in value terms in Jun’20 v/s 51% in Apr’20.
Thus, overall collection efficiency in the total portfolio improved to 76% in
Jun’20 v/s 29% in Apr’20.
Exhibit 3: PCR for the quarter increased by ~587bp to 66.6%
PCR (%)
Source: MOSL, Company
Valuation and view
The bank has one of the best operating metrics as it runs on a low-cost
operation model – it has the lowest cost per employee and the lowest cost asset
centers in rural/semi-urban geographies. BANDHAN highlighted limited scope
for further improvement in its C/I ratio; we thus estimate the cost-income ratio
to remain stable at 30–32% over FY20–22.
The bank has demonstrated strong execution skills in building its deposit
franchise. Notably, it has scaled up its deposit base to INR606b within a few
years of banking operations, with a focus on a low-ticket, granular book (CASA
mix at ~37%; retail TDs form nearly ~78% of the total deposit base). BANDHAN
has a 100–150bp cost of funds advantage over other SFBs.
~54% of the bank’s borrowers have vintage of four or more cycles (v/s just 6%
for the industry), allowing the bank to offer higher ticket size loans.
The bank has a strong track record of handling challenging situations such as
demonetization and GST, wherein it reversed to the normal delinquency rate
within a few months.
Buy, with target price of INR425:
As economic activity picks up in India, we are
seeing steady improvement in collection trends. Bandhan’s collection efficiency
in the MFI portfolio has improved to ~73%; at the overall portfolio level, it has
improved to ~76%. Thus, the incidence of moratorium availed has been
declining. Furthermore, the bank holds INR17.7b total COVID-19-related / excess
standard provisions (2.5% of loans) to manage higher delinquencies over
2HFY21. We maintain a Buy rating, with revised TP of INR425 (3.0x FY22E BV).
15 July 2020
6
 Motilal Oswal Financial Services
Bandhan Bank
Story in charts
Exhibit 4: Total advances grew 63.7% YoY to INR743b
Advances (on book +off book) (INRb)
YoY (%)
Exhibit 5: MFI loans grew 21% YoY (+3% QoQ)
MFI Loans (INRb)
YoY (%)
323
326
334
356
448
454
642
655
718
743
277
280
290
309
386
392
392
401
462
475
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 6: Total deposits grew 35% YoY to INR606b
Total deposits (INRb)
YoY (%)
Exhibit 7: CASA ratio improved to ~37%; retail deposits form
~78% of the total deposits
CASA ratio (%)
Retail deposits (%)
72%
80% 82% 85% 77% 76% 78% 76% 78%
78%
41% 41% 36%
34% 35% 37%
33% 34% 37% 37%
339
307
330
346
432
437
492
549
571
606
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 8: Margins expanded marginally to 8.15%
NIM (%)
Exhibit 9: Asset quality ratio improved, with GNPA/NNPA
ratio declining by 5bp/10bp to 1.43%/0.48%
GNPA ratio (%)
NNPA ratio (%)
Source: MOFSL, Company
Source: MOFSL, Company
15 July 2020
7
 Motilal Oswal Financial Services
Bandhan Bank
Exhibit 10: DuPont Analysis: Return ratio to remain strong
Interest Income
Interest Expense
Net Interest Income
Fee income
Trading and others
Other Income
Total Income
Operating Expenses
Employees
Others
Operating Profits
Core operating Profits
Provisions
NPA
Others
PBT
Tax
RoA
Leverage (x)
RoE
FY17
15.6
6.0
9.6
1.6
0.1
1.6
11.3
4.1
2.2
1.9
7.2
7.1
0.4
0.2
0.2
6.8
2.4
4.45
6.4
28.6
FY18
12.9
4.7
8.1
1.8
0.1
1.9
10.0
3.5
1.8
1.7
6.5
6.4
1.0
0.6
0.4
5.5
1.9
3.61
5.4
19.5
FY19
13.2
4.3
8.9
2.0
0.1
2.1
11.0
3.6
2.0
1.6
7.4
7.4
1.5
1.3
0.1
6.0
2.1
3.87
4.9
19.0
FY20
14.7
6.2
8.5
2.0
0.1
2.1
10.6
3.3
1.8
1.4
7.4
7.3
1.9
1.9
0.0
5.5
1.4
4.08
5.6
22.9
FY21E
13.2
5.5
7.6
1.8
0.1
1.8
9.5
2.9
1.7
1.3
6.6
6.5
1.8
1.7
0.1
4.8
1.2
3.6
5.8
20.8
FY22E
13.0
5.3
7.6
1.9
0.1
1.9
9.6
3.0
1.7
1.3
6.5
6.5
1.3
1.2
0.1
5.3
1.3
3.9
5.6
22.1
15 July 2020
8
 Motilal Oswal Financial Services
Bandhan Bank
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Growth (%)
Non-Interest Income
Total Income
Growth (%)
Operating Expenses
Pre Provision Profits
Growth (%)
Core PPoP
Growth (%)
Provisions (excl. tax)
PBT
Tax
Tax Rate (%)
PAT
Growth (%)
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Growth (%)
of which CASA Dep
Growth (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Growth (%)
Loans
Growth (%)
Fixed Assets
Other Assets
Total Assets
Asset Quality
GNPA
NNPA
GNPA Ratio
NNPA Ratio
Credit Cost
PCR (Excl. Tech. write off)
FY16
15.8
6.5
9.3
NM
1.5
10.8
NM
6.2
4.7
NM
4.6
NM
0.5
4.1
1.4
33.4
2.8
NM
FY17
39.1
15.1
24.0
157.7
4.1
28.1
160.0
10.2
17.9
284.1
17.7
281.1
0.9
17.0
5.9
34.8
11.1
304.0
FY18
48.0
17.7
30.3
26.2
7.1
37.4
32.8
13.1
24.3
35.5
23.8
34.6
3.7
20.6
7.1
34.6
13.5
21.0
FY19
66.4
21.5
45.0
48.3
10.6
55.6
48.7
18.1
37.5
54.2
37.1
55.7
7.4
30.1
10.6
35.2
19.5
45.0
FY20
108.9
45.6
63.2
40.7
15.5
78.7
41.6
24.3
54.5
45.3
54.0
45.5
13.9
40.5
10.3
25.4
30.2
54.9
FY21E
130.2
54.5
75.7
19.6
18.1
93.8
19.1
28.8
65.0
19.3
64.4
19.3
17.7
47.3
11.9
25.2
35.4
17.0
(INR b)
FY22E
150.7
61.8
88.9
17.5
22.5
111.3
18.7
35.3
76.0
17.0
75.4
17.0
15.0
61.1
15.4
25.2
45.7
29.0
FY16
11.0
22.4
33.3
120.9
NM
26.1
NM
30.5
12.8
197.6
31.7
37.6
NM
124.4
NM
2.4
1.5
197.6
FY16
0.2
0.1
0.2
0.1
0.0
45.4
FY17
11.0
33.5
44.5
232.3
92.2
68.4
162.4
10.3
15.3
302.4
73.6
55.2
46.8
168.4
35.4
2.5
2.6
302.4
FY17
0.9
0.6
0.5
0.4
0.3
29.1
FY18
11.9
81.9
93.8
338.7
45.8
116.2
70.0
2.9
7.7
443.1
55.1
83.7
51.8
297.1
76.5
2.4
4.8
443.1
FY18
3.7
1.7
1.3
0.6
1.0
53.7
FY19
11.9
100.1
112.0
432.3
27.6
176.2
51.6
5.2
14.9
564.4
58.0
100.4
19.9
396.4
33.4
3.3
6.3
564.4
FY19
8.2
2.3
2.1
0.6
1.9
72.1
FY20
16.1
135.9
152.0
570.8
32.0
210.4
19.4
163.8
30.6
917.2
83.5
153.5
52.9
666.3
68.1
3.7
10.1
917.2
FY20
9.9
3.9
1.5
0.6
2.6
60.8
FY21E
16.1
172.9
189.0
685.0
20.0
260.7
23.9
155.6
32.1
1,061.7
86.9
184.2
20.0
765.0
14.8
4.2
21.4
1,061.7
FY21E
24.0
8.8
3.1
1.2
2.4
63.1
FY22E
16.1
209.1
225.2
856.2
25.0
343.0
31.6
147.8
33.8
1,263.0
94.2
221.1
20.0
913.5
19.4
4.6
29.6
1,263.0
FY22E
19.9
7.1
2.2
0.8
1.7
64.3
15 July 2020
9
 Motilal Oswal Financial Services
Bandhan Bank
Financials and valuations
Ratios
Y/E March
Spread Analysis (%)
Avg. Yield- on Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost of Int. Bear. Liabilities
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Capitalization Ratios (%)
CAR
Tier I
Tier II
Business and Efficiency Ratios (%)
Loans/Deposit Ratio
CASA Ratio
Cost/Assets
Cost/Total Income
Cost/Core income
Int. Expense/Int. Income
Fee Income/Total Income
Non Int. Inc./Total Income
Emp. Cost/Total Expense
Investment/Deposit Ratio
FY16
18.7
20.6
7.0
8.7
7.0
10.0
11.0
FY17
17.3
21.3
9.2
8.0
6.8
9.4
10.7
FY18
13.9
16.4
7.1
6.5
6.7
7.5
8.8
FY19
14.2
16.5
6.7
6.0
6.5
8.2
9.6
FY20
15.6
17.9
6.6
8.3
6.4
7.4
9.1
FY21E
14.1
15.9
6.5
7.3
6.8
6.9
8.2
FY22E
14.0
15.8
6.3
7.1
6.6
6.9
8.3
29.0
26.7
2.3
26.4
24.8
1.6
31.5
30.3
1.2
29.2
27.9
1.3
27.4
25.2
2.2
23.6
23.1
0.4
23.2
22.8
0.4
102.9
21.6
3.1
56.9
57.0
41.0
13.7
13.8
52.8
31.1
72.5
29.4
3.4
36.3
36.6
38.5
13.8
14.6
53.4
23.7
87.7
34.3
3.0
35.0
35.4
36.9
17.7
18.9
52.6
24.7
91.7
40.8
3.2
32.6
32.8
32.3
18.4
19.1
55.7
23.2
116.7
36.9
2.6
30.8
31.0
41.9
19.1
19.7
56.3
26.9
111.7
38.1
2.7
30.7
30.9
41.9
18.7
19.3
57.0
26.9
106.7
40.1
2.8
31.7
31.9
41.0
19.6
20.2
57.2
25.8
Profitability Ratios and Valuation
RoE
RoA
RoRWA
Book Value (INR)
Growth (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Growth (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
8.3
1.4
2.2
30
NM
11.5
30
11.5
2.5
NM
139.1
0.0
0.0
28.6
4.4
7.4
41
33.3
8.6
40
8.7
10.2
NM
34.4
0.0
0.0
19.5
3.6
5.6
79
93.7
4.4
78
4.5
11.8
15.8
29.7
1.2
0.3
19.0
3.9
5.7
94
19.4
3.7
93
3.8
16.4
39.1
21.4
3.6
1.0
22.9
4.1
5.6
94
0.5
3.7
93
3.8
21.6
31.9
16.2
0.0
0.0
20.8
3.6
4.7
117
24.4
3.0
114
3.1
22.0
1.9
15.9
4.7
1.3
22.1
3.9
5.1
140
19.2
2.5
137
2.6
28.4
29.0
12.3
5.9
1.7
15 July 2020
10
 Motilal Oswal Financial Services
Bandhan Bank
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
15 July 2020
11
 Motilal Oswal Financial Services
Bandhan Bank
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
15 July 2020
12