Neutral on Bandhan Bank, target price Rs 370: Motilal Oswal

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Neutral on Bandhan Bank, target price Rs 370:  Motilal Oswal


Motilal Oswal has neutral call on Bandhan Bank with a target price of Rs 370. The current market price of Bandhan Bank Ltd. is Rs 327.2.

Bandhan Bank Ltd., incorporated in the year 2014, is a banking company (having a market cap of Rs 52796.30 Crore).

Financials
The Bank reported a Gross Non Performing Assets (Gross NPAs) of Rs 859.22 Crore (.00 % of total assets) and Net Non Performing Assets (Net NPAs) of Rs 201.34 Crore (.00% of total assets). For the quarter ended 31-12-2020, the company reported a Standalone Interest Income of Rs 2906.82 Crore, up 4.09 % from last quarter Interest Income of Rs 2792.55 Crore and up 22.59 % from last year same quarter Interest Income of Rs 2371.15 Crore. The bank reported net profit after tax of Rs 632.59 Crore in latest quarter.

Investment Rationale
BANDHAN reported a sharp deterioration in asset quality trends, with pro-forma GNPA ratio increasing to ~7.1%, while collection efficiency in the MFI portfolio in its core state of Assam has witnessed a sharp decline. The bank has made higher COVID-related provisions of INR10b during 3QFY21, pre-dominantly towards rising stress in Assam, thus taking additional provisions to 3.6% of loans to manage higher delinquencies in coming quarters. Operating performance remains strong and continues to demonstrate strong deposit performance, led by retail deposits. The brokerage cut earnings for FY21E by 22% to factor in higher credit cost at 4.4%/2.6% for FY21E/FY22E.

Promoter/FII Holdings
Promoters held 40 per cent stake in the company as of Dec 30, 2020, while FIIs held 35.2 per cent, DIIs 4.4 per cent and public and others 20.4 per cent





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