shares of private sector lender Bandhan Bank Ltd. Were in focus on Wednesday after the lender released business updates for the March-ended quarter of fiscal year 2022. The significant increase in business speed and improvement in collection efficiency were the major attractions.
loans and advances stood 1,01,359 crore, up 16% year-on-year (yoy) and 15% quarter-on-quarter (qoq) as on 31 March 2022. The overall collection efficiency ratio (CER) was 96% in Q4FY22 as compared to 93% during October-December. The collection efficiency in the micro finance lending segment increased to 95% in Q4FY22.
CASA (Current Account Savings Account) deposits grew by 18%, however, the CASA ratio declined to 41.6% from 45.6% in Q3FY22. According to analysts at Jefferies India Pvt Ltd, the sharp sequential decline in the CASA ratio of around 400 basis points was on account of higher bulk deposits and should normalize in Q1FY23. One basis point is one hundredth of a percentile.
Retail deposits accounted for 77% of total deposits; In Q3FY22, the proportion of retail deposits stood at 85%. The lender’s total deposits grew 24% year-on-year in the March quarter.
The bank’s shares fell nearly 2% on the National Stock Exchange in early deals on Wednesday. While the bank’s performance during the recently ended quarter was better than before, some concerns remain, say analysts.
Analysts at Motilal Oswal Financial Services Ltd said the trend towards improving collection efficiency should continue to reduce credit cost and support earnings for Bandhan Bank. However, the movement in the Special Mention Account (SMA) book and the performance of the restructured book remains a key monitorable. SMAs are accounts that can be non-performing.
Analysts at Edelweiss Securities Ltd. has upgraded the stock’s rating from reduce to buy. That said, he cautioned against some downside risks. The Edelweiss report states, “Given the impending diversification execution, some red flags around the sector (inflation impact on the underlying borrower base) and inherent volatility in the business model, we believe that the bank will not be able to support the earlier level is unlikely to return.” April 5.
During the past one year, the stock of Bandhan Bank has outperformed the sectoral index of Nifty Bank by a huge margin. While Lender’s shares fell 8%, the index rose nearly 16%. Investors would recall that in Q2FY21, Bandhan Bank had reported a significant loss on account of accelerated provisioning. The crisis in the micro finance lending segment mainly related to accounts in West Bengal and Assam dented investor sentiment towards the stock.
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