15 July 2020
1QFY21 Results Update | Sector: Financials
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TP: INR425 (+22%)
Collection trends improve steadily
Liability franchise strong; Prudential provisions to aid earnings
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
563 / 7.6
650 / 152
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
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.
Financials & Valuations (INR b)
EPS Gr. (%)
Shareholding pattern (%)
FII Includes depository receipts
COVID-19 provisions drag down earnings; provision coverage
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.
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
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020