Bandhan Bank Stock Analysis | Why Bandhan Bank stock is falling?

Bandhan Bank Q3 FY2019-20 Financial Highlights

Introduction

In this article, we are going to see Bandhan Bank Q3 FY20 results update. Bank reported net profit of Rs.731 Cr in Q3 FY20, almost 25% fall in net profit QoQ. Also, deterioration in asset quality is seen on account of rising stressed account in Micro Finance Institution segment.

Bandhan Bank Q3 FY20 Results Update

Here, we have accessed the quarterly growth of Bandhan bank by comparing the Q3 FY20 results with last quarter, Q2 FY20 ie. after Bandhan Bank and Gruh Finance Merger.

Q3 FY2019-20 Results Analysis

• Net Interest Income is Rs.1,541 Cr from Rs.1,529 Cr in Q2 FY20, increased by only 0.77% QoQ.
  • Total Deposit growth in 12.6% while Advances growth is just 2%. To increase and sustain the deposit growth, bank offers comparatively competitive interest rates on the Term Deposits and Saving Deposits.
  • As a result, interest expenses growth is greater than interest income.
  • Thus, NII growth remained flat, with Net Interest Margin of 7.9% (Annualized) for Q3 FY20
• Operating profit decreased by almost 3.28% QoQ on account of :
  • Total income growth is flat due to moderate NII and decline in Non Interest Income.
  • Increase in operating expenses by 9% QoQ
  • Deterioration in cost to income ratio in Q3, increased to 33.4% from 30.8%.
• Provisions for the quarter Q3 FY20, were Rs.294 Cr with a QoQ growth of 100% as against Rs.146 Cr for Q2 FY20.
  • Provisions are doubled in December quarter as compared with September quarter given recent unrest in Assam and decline in collection efficiency,
    bank has parked additional provision of Rs.200 Cr in Q3 FY20.
• Net profit for Q3 FY20 is Rs.731 Cr against Rs.972 Cr in last quarter, declined by almost 24.9% QoQ mainly due to the rise in provisions.
  • Bank made additional provision of Rs.200 Cr for Micro Finance Institutions book in Assam which forms 10% of total loan book.

Q3 FY2019-20 Balance sheet Summary

• Balance sheet size is increased by 4% to Rs.84,791 Cr in Q3 FY20 from Rs.81,568 Cr in Q2 FY20.
• Total Advances of the bank has seen a moderate growth of 2% QoQ and increased to Rs.65,456 Cr in Dec-19 from Rs.64,186 Cr in last quarter.
• Total Asset under Management (AUM) is comprising of :
  1. Micro Loans : Highest contribution of Rs.40,100 Cr to total AUM of bank
  2. Non Micro Loans : Total AUM growth in Q3 is on account of 7.8% growth in Non Micro Loans
  3. Inclusion of Gruh Finance Loan book of almost Rs.18,113 Cr in Q3 FY20
• Total Deposits are increased by 12.6% in Q3 FY20 to Rs.54,908 Cr from Rs.49,195 Cr in Sept quarter.
  • CASA Deposits has grown 16.4% QoQ

Advances (AUM) Mix %

• Micro Finance Institution Loans are the top contributing segment (61%) in total AUM (Advances) of Bandhan Bank.
• Mortgage loans are almost 29% of total loan book, with second highest segment.

Key Ratios

• Asset Quality
  • In Q3 FY20, Asset quality weakened further with gross non-performing assets (GNPA) rising sequentially to 1.93% in Q3 from 1.76% in Q2.
  • Also, Net NPA increased 25 basis points QoQ to 0.81% in Q3 from 0.56% in Q2 due to some stress in Micro Finance Institution and strict NPA recognition policy on Gruh Finance’s housing book as applicable to banks.
• CASA Ratio has improved to 34.3% in Q3 from 33% in Sept quarter.
• Capital Adequacy Ratio (CAR) has seen a marginal deterioration in Q3 to 24.7% from 25.1% in Q2.
• Net Interest Margin (NIM) contracted to 7.9% from 8.2% due to moderate growth in Advances as compared with high deposit growth.
• Cost to Income Ratio increased QoQ to 33.4% in Dec quarter from 30.8% in Sep quarter on account of rise in operating expenses by 9% and muted growth in total income.