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Elevated MFI slippages may persist
View Risks →Bandhan Bank Limited — Q3 FY25
Bandhan Bank's Q3 FY25 results were weak, with PAT at INR 426 crore, down 42% YoY, driven by elevated provisions of INR 1,376 crore (including INR 336 crore from technical write-offs) and a one-off ESOP expense of INR 166 crore.
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Bandhan Bank's Q3 FY25 results were weak, with PAT at INR 426 crore, down 42% YoY, driven by elevated provisions of INR 1,376 crore (including INR 336 crore from technical write-offs) and a one-off ESOP expense of INR 166 crore. NIM compressed to 6.9% (down 50bps QoQ) due to a shift toward secured assets and higher slippages. Gross slippages surged to INR 1,621 crore, primarily from the EEB book (INR 1,196 crore), reflecting stress in the microfinance sector. Management guided for a secured mix of 55%+ by FY27, which will further moderate NIMs but aims to keep ROA near 2%. Credit cost is expected to normalize to ~2% in the near term. Key risk: continued deterioration in MFI asset quality, with SMA 1+2 buckets rising, could keep slippages elevated in Q4.
बंधन बैंक की तीसरी तिमाही के नतीजे कमजोर रहे। मुनाफा 426 करोड़ रुपये रहा, जो पिछले साल से 42% कम है। इसकी वजह है भारी प्रावधान (खराब कर्ज के लिए रखा गया पैसा) 1,376 करोड़ रुपये और कर्मचारियों को दिए गए शेयरों का एकमुश्त खर्च 166 करोड़ रुपये। ब्याज आय और खर्च का अंतर (NIM) घटकर 6.9% रह गया, क्योंकि बैंक सुरक्षित कर्ज पर जोर दे रहा है और कर्ज डूबने के मामले बढ़े हैं। सबसे ज्यादा परेशानी माइक्रोफाइनेंस (छोटे कर्ज) सेक्टर में है, जहां 1,621 करोड़ रुपये के कर्ज डूबे। बैंक का लक्ष्य 2027 तक 55% से ज्यादा सुरक्षित कर्ज देना है, जिससे मुनाफा कम होगा लेकिन कुल संपत्ति पर रिटर्न (ROA) 2% के आसपास रखने की कोशिश है। खतरा: अगर माइक्रोफाइनेंस कर्ज और बिगड़ा, तो अगली तिमाही में भी डूबे कर्ज बढ़ सकते हैं।
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Secured Book Mix
49%
+7pp YoY
Secured advances grew 34% YoY, driving the mix from 42% to 49%.
EEB Slippages
INR 1,196 crore
+59% QoQ
EEB slippages increased sharply from INR 752 crore in Q2, reflecting MFI stress.
Collection Efficiency (EEB, ex-NPA)
97.4%
-70bps QoQ
Declined from 98.1% in Q2, with rest-of-India EEB dropping to 96.3%.
CASA Ratio
32%
-4pp YoY
CASA deposits grew only 6% YoY, with ratio declining from 36% a year ago.
What Changed vs Last Quarter
NEW
Secured mix target of 55%+ by FY27
Management aims to increase secured advances share from 49% to over 55% by FY27, with secured book growing 3x faster than EEB.
NEW
Credit cost target of ~2% in near term, 1.5-1.6% by FY27
CFO guided for overall credit cost to stabilize around 2% in the near future and decline to 1.5-1.6% by FY27 as secured mix improves.
NEW
NIM to moderate further
CEO stated NIM will continue to moderate as the bank shifts to secured assets, but ROA target remains near 2% through volume growth and cost control.
NEW
EEB disbursements to be calibrated in Q4
Management indicated Q4 EEB disbursements will be moderated versus prior year, with focus on renewals for good-quality borrowers.
DROPPED
Credit cost guidance of 1.8%-2% for FY25
Management expects full-year credit cost to remain within 1.8%-2% of advances, with Q3 potentially elevated but Q4 showing improvement.
DROPPED
Advances growth of 18% ± 1% for FY25
Overall advances growth target of 18% ± 1%, with EEB growing at 10%-12% and secured book growing faster.
DROPPED
NIM guidance of 7%-7.5% for FY25
Net interest margin expected to remain in the 7%-7.5% range, with some moderation in coming quarters due to product mix shift.
DROPPED
OpEx to assets ratio similar to FY24
Operating expenses to average assets ratio expected to be at similar levels as FY24, around 3.7%-3.8%.
NEW RISK
Karnataka MFI ordinance impact
Analyst raised concern about potential Karnataka legislation; management downplayed risk given small exposure (INR 740 crore), but uncertainty remains.
NEW RISK
NIM compression from secured shift
As secured mix increases, NIM is expected to moderate further, potentially pressuring profitability if volume growth doesn't compensate.
NEW RISK
OpEx growth outpacing income growth
Adjusted OpEx grew 23% YoY, higher than NII growth of 12%, driven by technology investments and branch expansion, which may weigh on near-term efficiency.
RISK GONE
Margin compression from product mix shift
Shift towards secured assets (lower yield) could pressure NIMs. Management acknowledged potential yield stress in coming quarters.
RISK GONE
Over-leveraging in microfinance sector
Despite Bandhan's unique customer share of 60%, industry-wide over-leveraging and credit freeze risks could impact asset quality. RBI actions on MFI lenders may add systemic risk.
RISK GONE
Capital adequacy pressure
Tier 1 ratio (including H1 profits) at ~14% is adequate for now, but rapid secured book growth and elevated credit costs could necessitate capital raise if stress persists.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q1 FY25, Q2 FY24, Q4 FY24
Management expects overall loan book growth of 18-20% for FY25, with secured book growing faster than EEB.
Mentioned in Q1 FY25, Q2 FY24, Q2 FY25
Management expects full-year credit cost to remain within 1.8%-2% of advances, with Q3 potentially elevated but Q4 showing improvement.
Mentioned in Q1 FY25, Q2 FY25
Tier 1 ratio (including H1 profits) at ~14% is adequate for now, but rapid secured book growth and elevated credit costs could necessitate capital raise if stress persists.
Mentioned in Q1 FY25, Q4 FY24
The bank is operating with an interim MD&CEO; the board has not yet submitted names to RBI, creating leadership uncertainty.
Mentioned in Q3 FY24, Q4 FY24
The pending CGFMU audit may not yield the expected positive result, potentially impacting recoveries and capital.
Fast read
Guidance and risk preview
Management aims to increase secured advances share from 49% to over 55% by FY27, with secured book growing 3x faster than EEB.
Despite SMA 0 improvement, SMA 1+2 buckets increased, and management expects Q4 slippages to remain substantial (though lower than Q3).
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