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What the record says.
Bandhan Bank's Q4 FY25 PAT of INR 318 crore (vs INR 55 crore last year) was aided by low base and tax credits, but core operating performance weakened. NII declined 4% YoY to INR 2,756 crore as NIM compressed to 6.7% (down 20bps QoQ) due to secured mix shift and elevated slippages. Credit costs remained high at 3.9% of advances, though down from 4.1% QoQ. The EEB book saw slippages of INR 1,349 crore, but collection efficiency improved to 97.8%. Management guided for 15-17% advances growth over 3 years, targeting secured mix >55% by FY27, and credit costs of 1.5-1.6% over 2-3 years. Near-term headwinds persist from MFI stress and investment costs, with ROA expected to trough in H1 FY26 before recovering. Key risk: slower-than-expected improvement in MFI asset quality could delay profitability recovery.
Colored figures show movement against the previous available record.
Guidance to track
- Targeting 15-17% year-over-year advances growth, with secured mix exceeding 55% by FY27.
- Expect credit costs to improve from current elevated levels to 1.5-1.6% on a full-year basis over the next 2-3 years.
- Aiming for return on assets of 1.8-1.9% over the next 2-3 years, driven by better asset quality and operating leverage.
- Operating expenses to average assets ratio expected to rise by 10-20 basis points from current levels over the next two years due to investments.
Risks flagged
- Credit costs remain high at 3.9% due to continued stress in microfinance; management expects H1 FY26 to be challenging.
- As secured book grows, yields are expected to moderate; CFO guided NIMs could decline 50-60bps over 3 years.
- West Bengal accounts for 23% of advances and 40% of deposits; localized disruptions (e.g., Murshidabad) could impact collections.
- Analyst noted that loans disbursed in FY24 have NPA rates of 3.5-4%, raising concerns about underwriting quality.
Key quotes
- We are targeting an advances growth of 15%-17% stage year over the next three years, with a strategic focus on increasing the secured mix.
- While credit costs are expected to remain elevated in half year of financial 2025-2026, we are targeting to reach 1.5%-1.6% on full year basis of the credit costs over the next two to three years.
- Our focus remains on a steady and sustainable improvement in profitability, with a clear path towards improving ROA to 1.8%-1.9% over the next two to three years.
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