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What the record says.
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.
Colored figures show movement against the previous available record.
Guidance to track
- Management aims to increase secured advances share from 49% to over 55% by FY27, with secured book growing 3x faster than EEB.
- 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.
- 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.
- Management indicated Q4 EEB disbursements will be moderated versus prior year, with focus on renewals for good-quality borrowers.
Risks flagged
- Despite SMA 0 improvement, SMA 1+2 buckets increased, and management expects Q4 slippages to remain substantial (though lower than Q3).
- Analyst raised concern about potential Karnataka legislation; management downplayed risk given small exposure (INR 740 crore), but uncertainty remains.
- As secured mix increases, NIM is expected to moderate further, potentially pressuring profitability if volume growth doesn't compensate.
- 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.
Key quotes
- If I grow 100 in EEB, I will grow 300 in the other segments.
- The level of slippages would not be 1,196, what we have witnessed in Q3, but it will be substantial.
- None of the universal banks give such a high NIM. Bandhan's current level of 7.3% is not for a universal bank.
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