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    Bandhan Bank

    BANDHANBNKGood
    Financial Services·18 Jul 2025
    Management Summary

    Bandhan Bank's Q1 FY26 results reflect a strategic transition towards a more diversified and secured lending book amidst headwinds in the micro-entrepreneur (EEB) segment. While profitability was impacted by elevated provisioning and NIM compression, the bank saw robust deposit growth and a significant shift in its asset mix. Management remains optimistic about a recovery in the EEB segment starting H2 FY26, supported by industry-wide guardrails and internal diversification initiatives.

    Highlights

    7

    • Net Profit (PAT) reported at ₹372 crores, a significant decline from ₹1,063 crores in Q1 FY25

    • Gross Advances grew 6% YoY to ₹1.34 lakh crores, while Total Deposits rose 16% YoY to ₹1.55 lakh crores

    • Net Interest Margin (NIM) moderated to 6.4% from 6.7% in the previous quarter

    • Secured loan portfolio now constitutes 52% of total advances, up from 43% a year ago

    • Asset quality showed Gross NPA at 5.0% and Net NPA at 1.4%, with technical write-offs of ₹1,047 crores during the quarter

    • Retail term deposits demonstrated strong momentum, growing by 34% YoY

    • Credit cost improved sequentially to 3.5% of advances, down from 3.9% in Q4 FY25

    Concerns

    1

    • EEB (Microfinance) Sector Stress

    What Changed3

    vs Q3 FY26

    Guidance items8 → 4 (-4)Risks discussed4 → 3 (-1)Q&A highlights8 → 3 (-5)

    Key financials

    Single quarter

    06 metrics
    1. 01Net Interest Income₹2,757 Cr-8%YoY
    2. 02NIM6.4%-4.5%QoQ
    3. 03PAT₹372 Cr-65%YoY
    4. 04Gross NPA5%
    5. 05CASA Ratio27%

    Segment breakdown

    EEB (Emerging Entrepreneurs Business)
    ₹52,812 Cr Portfolio Size-15% YoY Growth₹1,089 Cr Slippages
    Non-EEB Portfolio
    27% YoY Growth60% Share of Total Advances
    Retail Assets
    78% YoY Growth
    List

    Guidance & targets

    4
    CategoryTargetPriority
    Volume
    Overall Growth Target
    15-17%
    		Medium
    Volume
    EEB Portfolio Growth
    5-8%
    		Medium
    Profitability
    Credit Cost
    2.5%
    		High
    Margin
    NIM Stabilization
    Stabilization in H2
    		Medium

    Risks & concerns

    4
    RiskSeverity

    EEB (Microfinance) Sector Stress

    Over-leverage in the industry and new regulatory guardrails have led to a 15% YoY contraction in the EEB book. — Both acknowledged

    high

    NIM Compression

    Repo rate cuts and a shift toward lower-yielding secured loans are pressuring margins in the near term. — Both acknowledged

    medium

    Geographic Concentration

    West Bengal remains the largest contributor to advances (22.8%) and deposits (~40%), posing regional risk. — Analyst acknowledged

    medium

    Areas of Evasion(1)

    • Specific guidance on the exact quantum of NIM compression expected in Q2.

    Q&A highlights

    3

    “Primarily due to 3 lender norms and also that nobody is onboarding more than 60 DPD in their books at total and secured exposure of 2 lakhs.”

    Explains the sharp drop in MFI disbursals as a result of stricter industry-wide lending norms (Guardrail 2.0).

    asked by Kunal Shah, Citigroup

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Shift to Secured Lending

    Bandhan Bank is aggressively diversifying its asset base to reduce reliance on the volatile microfinance (EEB) segment. The secured loan book grew 29% YoY and now accounts for 52% of total advances, compared to 43% in the previous year. This shift is driven by robust growth in retail assets (+78% YoY), wholesale banking (+32% YoY), and housing loans (+15% YoY). Management expects this trend to enhance the long-term stability and resilience of the balance sheet.

    02

    EEB Segment Navigates Regulatory Headwinds

    The Emerging Entrepreneurs Business (EEB) faced a 15% YoY decline in portfolio size to ₹52,812 crores. This was primarily due to the implementation of 'Guardrail 2.0' industry norms, which limit lending to over-leveraged borrowers. Rejection rates have climbed to 16-18% as the bank adheres to the 3-lender norm and 60 DPD limits. However, management anticipates a gradual recovery in the second half of the fiscal year as the environment stabilizes.

    03

    Deposit Franchise Shows Granular Strength

    Total deposits reached ₹1.55 lakh crores, outpacing advance growth with a 16% YoY increase. Retail term deposits were a standout performer, growing 34% YoY. The bank successfully reduced its reliance on bulk deposits, which now form 43.6% of total term deposits versus 46.3% a year ago. The 'ONE BANDHAN' initiative alone generated ₹4,200 crores in incremental retail term deposits during the quarter.

    04

    Asset Quality and Provisioning Trajectory

    Asset quality remains a key focus area, with Gross NPA at 5.0% and Net NPA at 1.4%. The bank undertook technical write-offs of ₹1,047 crores, mostly in the EEB segment (₹952 crores). Credit costs showed sequential improvement, falling to 3.5% from 3.9% in Q4 FY25. Management has guided for a further reduction in credit costs to 2.5% for the second half of FY26 as slippages continue to moderate.

    05

    NIM Compression and Cost of Funds

    NIM moderated to 6.4% due to the impact of repo rate cuts and a higher mix of secured (lower-yielding) loans. However, the bank saw a 19 basis point improvement in the cost of deposits sequentially, aided by strategic interest rate cuts on savings and term accounts in April 2025. Management expects NIM to stabilize in H2 FY26 as the full benefit of deposit repricing flows through the books.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.