Shares of Bandhan Bank plunge 10% as Q2 numbers disappoint Street | The Financial Express

Shares of Bandhan Bank plunge 10% as Q2 numbers disappoint Street

The lender on Friday reported a net profit of Rs 209.3 crore for the second quarter, against a net loss of Rs 3,008.6 crore for the same period last fiscal

Shares of Bandhan Bank plunge 10% as Q2 numbers disappoint Street
In the second quarter, 66% of the lender's NPA customers and 62% of its restructured customers paid their dues, either in part or in full. (IE)

Shares of Bandhan Bank closed 10.01% lower at Rs 238.65 on the BSE on Monday as the lender’s second quarter numbers were below Street estimates. On the NSE, the scrip closed down 9.78% at Rs 239.40.

The lender on Friday reported a net profit of Rs 209.3 crore for the second quarter, against a net loss of Rs 3,008.6 crore for the same period last fiscal. However, the net profit plunged 76% on a quarter-on-quarter basis from Rs 886.5 crore, as the lender made higher provisions.

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In a note on the bank, ICICI Securities said, “Volatility continued with elevated delinquencies, aggressive write-offs, credit cost of 5.3%, NIM decline of 100 basis points quarter-on-quarter and elevated opex to assets at 3.3%. Adjusting for write-offs, given lagged effect of Assam floods and forward flow from restructured pool, stress pool has risen by Rs 900 crore.”

Meanwhile, the lender has observed an “eagerness” among its delinquent microfinance borrowers to standardise their accounts so that they continue to enjoy benefits of formal credit. The lender has seen this trend after it tightened the credit underwriting process for customers with a history of default on loan repayment.

“We have seen a good improvement in overall collection efficiency, which is 98%. The collection efficiency for microcredit vertical, excluding restructuring and NPA, improved substantially to 98% from 86% for the second quarter last year. With people’s livelihood coming back on track, we have observed an eagerness among our customers to standardise their accounts in order to continue to enjoy the benefit for formal credit by maintaining a healthy credit record,” managing director and CEO Chandra Shekhar Ghosh said during the bank’s Q2 earnings call.

Ghosh said the bank saw strong demands for credit in most of the businesses. However, in line with its agenda for loan portfolio diversification agenda and further strengthening of credit underwriting standards, the bank has seen “some de-growth” in the microcredit business.

“With the initial trend and report from the ground, we are confident that third and fourth quarters will see good improvement in performance of the bank across verticals, especially microcredit. Many of our customers have been paying regularly and have nearly regularized their overdue accounts. But until the end of their overdue accounts are recorded, they cannot be categorized as non-NPA customers,” Ghosh said.

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In the second quarter, 66% of the lender’s NPA customers and 62% of its restructured customers paid their dues, either in part or in full. Total cash recovery and upgradation stood at Rs 529 crore. “We are engaged with our customers in a regular basis to encourage them to ensure timely payment. We are confident that it is only a matter of time before they fully regularise their accounts, after which we expect to see a significant drop in the gross NPAs in the next couple of quarters,” Ghosh said.

On tightening of the credit underwriting process, chief financial officer Sunil Samdani said earlier the lender used to disburse fresh loans to delinquent microfinance customers within a week after full repayment. But, now it is waiting for “months” before disbursing fresh loans to such customers even after they repay all overdue payments. “This change is already reflected in Q2 disbursement,” Samdani said.

During Q2FY23, total loan portfolio grew 17.4% on a year-on-year basis. “When we look at the loan book growth, other than microcredit book, we have seen a growth of 52%, which is very encouraging for the bank. The growth in this segment is a welcome sign for the bank as this is in line with the lender’s portfolio diversification agenda,” Ghosh said.

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First published on: 01-11-2022 at 00:15 IST