Bandhan Bank Limited — Q1 FY26 earnings call

Call held 18 Jul 2025

Management summary

Bandhan Bank reported a mixed Q1 FY26, with robust deposit growth and a strong capital position, alongside continued challenges in the EEB segment leading to moderated advances growth and NIM compression. Asset quality saw some improvement in slippages but GNPA/NNPA ratios were slightly higher due to technical write-offs. The bank is focusing on diversification, granular deposit mobilization, and expects a gradual recovery in the EEB segment from H2 FY26.

Highlights

  • Total deposits reached INR 1.55 lakh crores, reflecting a robust YoY growth of 16%, significantly outpacing advances growth.

  • Retail term deposits demonstrated strong momentum, growing by 34% YoY, indicating increased trust and effective distribution.

  • The secured book recorded a YoY growth of 29%, improving the secured portfolio mix to 52% from 43% a year ago.

  • Net Total Income stood at INR 3,483 crores, with non-interest income growing by 33% YoY, driven by higher treasury income and third-party products.

  • Operating profit for the quarter was INR 1,668 crores, a nearly 6% increase sequentially, and credit costs showed a moderate improvement sequentially to 3.5% from 3.9% in Q4FY25.

  • Capital Adequacy Ratio stands strong at 19.4% and Tier I capital at 18.6%, providing adequate headroom for future growth.

Concerns

  • Gross advances grew 6% YoY to INR 1.34 lakh crores, but the EEB portfolio declined 15% YoY and 7% QoQ.

  • CASA deposits declined 12% QoQ to INR 41,858 crores, primarily due to Q1 seasonality and a reduction in savings interest rates.

  • NIM for the quarter stood at 6.4%, a decline from 6.7% in Q4FY25, mainly due to increased secured loans and repo rate cuts.

  • Gross NPA stood at 5.0% and Net NPA at 1.4%, slightly higher than the previous quarter, partly due to technical write-offs amounting to INR 1,047 crores.

  • PAT was INR 372 crores, a significant YoY decline from INR 1,063 crores in Q1FY25, with ROA at 0.8% and ROE at 6%.

Key financials

  1. Gross Advances ₹1.34L Cr +6%YoY
  2. Total Deposits ₹1.55L Cr +16%YoY
  3. NIM 6.4% -0.3%QoQ
  4. Gross NPA 5%
  5. Net NPA 1.4%
  6. PAT ₹372 Cr -65%YoY
  7. Slippages ₹1,553 Cr -11.1%QoQ
  8. Credit Cost 3.5% -0.4%QoQ
  9. Capital Adequacy Ratio 19.4%
  10. Tier I Capital 18.6%

What they filed

Q1 FY27: revenue up 2.8%, net profit up 34.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue5,500 5,479 5,434 5,476 5,354 −3%5,431 −1%5,428 −0%5,631 +3%
Net profit937 426 318 372 112 −88%206 −52%534 +68%502 +35%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentShare of AdvancesYoY Growth
EEB Portfolio25%-0.15 decimal_fraction
Non-EEB Portfolio60%0.27 decimal_fraction
Secured Book52%0.29 decimal_fraction
Retail Assets8%0.78 decimal_fraction
Wholesale Banking28%0.32 decimal_fraction
Housing25%0.15 decimal_fraction
SBAL14%—

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Capital Adequacy Ratio stands at 19.4% and Tier I capital at 18.6%, providing adequate headroom to support future growth.
    Our capital position remains strong, including Q1FY26 profit the Capital Adequacy Ratio stands at 19.4% and Tier I capital at 18.6%, providing adequate headroom to support future growth.

Guidance & targets

Credit Growth

  • EEB Portfolio Growth Credit Growth · FY26 · Medium confidence 5% to 8%
    I think it will be somewhere between 5% to 8% of growth for us in this year FY26.

    — Vishal Wadhwa

  • Overall Credit Growth Credit Growth · FY26 · Medium confidence 15% to 17%
    Overall 15% to 17% target is the growth target.

    — Vishal Wadhwa

Credit Cost

  • Overall Credit Cost Credit Cost · FY26 · High confidence 2.5%
    overall credit cost of 2.5% as per the guidance we have given we will try to maintain that.

    — Partha Pratim Sengupta

EEB Segment

  • EEB Segment Recovery EEB Segment · H2 FY26 · Medium confidence gradual and steady recovery
    we expect to witness a gradual and steady recovery in the EEB segment over the coming months, with a positive bias emerging in the second half of the fiscal year.

    — Partha Pratim Sengupta

  • EEB Disbursal Growth EEB Segment · from quarter 3 onwards · Medium confidence 10% to 15%
    It may not step up to the way it was stepped up before like 30% - 40% compounded annual growth. It will be in the region of 10% to 15% growth from quarter 3 onwards.

    — Vishal Wadhwa

What to watch in Q2 FY26

EEB Segment Recovery

H2 FY26
Current Challenges persisting until Q2 FY26
Target Gradual and steady recovery with positive bias

Why it matters

Recovery in the EEB segment is crucial for overall growth and profitability, as it has been a drag.

Further, as highlighted in our previous communications, we anticipate challenges in the EEB segment to persist until the second quarter of FY26, albeit on an improving trajectory. In line with this outlook, our EEB portfolio has had a bearing on both our overall growth and profitability in Q1FY26. That said, we remain cautiously optimistic. Recent regulatory and monetary interventions such as reduction in RWA for lending to MFI and NBFC-MFI as well as PSL related relaxations, have been constructive for the sector, and we expect to witness a gradual and steady recovery in the EEB segment over the coming months, with a positive bias emerging in the second half of the fiscal year.

Risks & concerns

  • EEB segment challenges

    medium

    Challenges in the EEB segment are anticipated to persist until Q2 FY26, albeit with an improving trajectory, impacting overall growth and profitability.

    Management acknowledged

  • NIM compression

    medium

    NIM is expected to moderate further in the next quarter due to increased secured loans and repo rate cuts, though partially offset by reduced cost of funds.

    Management acknowledged

  • Aggressive lending in non-micro segments

    medium

    With NBFC-MFIs now able to do 40% non-micro business, there might be aggression in individual loan segments, potentially leading to new risks if not managed with guardrails.

    Analyst acknowledged

  • Geographical growth challenges

    medium

    Growth in southern parts of India, specifically Karnataka and Tamil Nadu, remains challenging due to guardrails and political interference, making it tough to expand there.

    Management acknowledged

  • SMA-0 increase due to holiday billing

    low

    An increase in SMA-0 is expected due to procedural changes for holiday billing, particularly in West Bengal and Assam, but is considered recoverable and not a major concern.

    Management downplayed

Q&A highlights

6 direct
EEB disbursals and rejection rates Direct
So obviously, the disbursals moderated because of the guardrails, which got implemented and these guardrails are good in nature from a long-term perspective. But obviously, there has been some impact on the short term, there has been a moderated growth in disbursement because of the lender norms and in terms of the rejection, which has gone up - 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.

Analyst questioned the decline in EEB disbursals, and management explained the impact of new guardrails and increased rejection rates (16-18%) due to industry-wide defaults.

Asked by Kunal Shah

Vintage analysis and NPA trajectory Direct
I foresee that this will some of will be in the range of 3% NPA, not in the range of 4.5%, 5%, in times to come.

Analyst inquired about persistent 4-5% NPA in recently written pools, and management projected a decline to 3% for future books due to better underwriting post-over-leverage issues.

Asked by Kunal Shah

SMA-0 increase due to holiday billing Direct
And that's why you see there is an elevation on SMA-0, which, however, is pretty much recoverable.

Analyst asked about the increase in SMA-0, and management clarified it's due to a procedural change in raising installment demands on holidays, affecting West Bengal and Assam, but is recoverable.

Asked by Anand Dama

Increase in Retail and Housing NPAs Partial
Here on this side, on the retail portfolio, the old book, which is like mostly in the unsecured side, that is showing little stress, and we have never written off anything on those unsecured.

Analyst noted an increase in retail and housing NPAs, and management attributed it to stress in the older, unsecured book, with recent books performing better and trends now lowering.

Asked by Anand Dama

Industry discipline and aggressive lending Direct
So for us, like what we spoke, we have been disciplined from 2nd April, guardrails 2.0 got implemented. We have been following very religiously and diligently. Now somebody is trying to play aggressively in the long run, this may not be great for that particular entity.

Analyst questioned industry discipline regarding aggressive lending despite guardrails, and management affirmed their own discipline while acknowledging potential aggression in non-micro segments by other players.

Asked by Mahrukh Adajania

EEB disbursal scaling up timeline Direct
It may not step up to the way it was stepped up before like 30% - 40% compounded annual growth. It will be in the region of 10% to 15% growth from quarter 3 onwards.

Analyst asked for a timeline on EEB disbursal scaling, and management projected a 10-15% growth from Q3 FY26 onwards, lower than previous high growth rates.

Asked by Mahrukh Adajania

MFI yields and processing fees Direct
No. We have not hiked. No yield hike, no processing fee hike. No cuts there, and we have not hiked anything.

Analyst inquired if the bank or industry had adjusted MFI yields or processing fees, and management confirmed no changes, indicating stable pricing in the segment.

Asked by Piran Engineer

NIM trajectory Partial
NIM would be moderated, and we have to put it with additional business so that the quantum of profit increases.

Analyst asked for guidance on NIMs, and management indicated moderation due to repo rate cuts but noted offsets from reduced cost of funds, expecting some stabilization in H2 FY26.

Asked by Piran Engineer

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Detailed narrative

Q1 FY26 Performance Overview

Bandhan Bank reported gross advances of INR 1.34 lakh crores, a 6% YoY growth, while total deposits grew 16% YoY to INR 1.55 lakh crores. The EEB portfolio, however, declined 15% YoY and 7% QoQ. Net Total Income stood at INR 3,483 crores, with operating profit at INR 1,668 crores, a 6% sequential increase. PAT for the quarter was INR 372 crores, significantly lower than INR 1,063 crores in Q1 FY25, resulting in an ROA of 0.8% and ROE of 6%.

Asset Quality and Collections

Asset quality remains a top priority, with credit costs showing moderate sequential improvement to 3.5% from 3.9% in Q4 FY25. Gross slippages declined to INR 1,553 crores from INR 1,748 crores in the previous quarter, primarily driven by the EEB segment. However, Gross NPA stood at 5.0% and Net NPA at 1.4%, slightly higher than the previous quarter, partly due to technical write-offs of INR 1,047 crores. The bank's overall collection efficiency, excluding NPA, was 97.7% for Q1 FY26.

Deposit Franchise and Funding

Total deposits grew robustly by 16% YoY to INR 1.55 lakh crores, outpacing advances growth and reflecting a strategic focus on liability franchise strengthening. Retail term deposits showed strong momentum, growing 34% YoY. CASA deposits, however, declined 12% QoQ to INR 41,858 crores due to Q1 seasonality and a reduction in savings interest rates. The bank undertook strategic measures to reduce the cost of deposits by lowering interest rates, leading to a 19 basis points sequential reduction in the cost of funds.

EEB Segment Outlook and Guardrails

The EEB segment continues to face challenges, with its portfolio declining 15% YoY and 7% QoQ. Management anticipates these challenges to persist until Q2 FY26, with a gradual and steady recovery expected in H2 FY26. Disbursals in the EEB segment are projected to grow 10-15% from Q3 onwards, lower than previous high growth rates. The bank emphasizes strict adherence to guardrails 2.0, which has led to moderated disbursals and increased rejection rates (16-18%) for customers not meeting norms.

NIM Trajectory and Cost of Funds

NIM for Q1 FY26 stood at 6.4%, a decline from 6.7% in Q4 FY25. This moderation is primarily attributed to an increased proportion of secured loans, reduction in the CD ratio, and the impact of recent repo rate cuts. However, the decline was partially offset by a 19 basis points sequential improvement in the cost of funds due to rate reductions on savings deposits. Management expects NIM to moderate further in the next quarter but anticipates stabilization in H2 FY26, supported by improving slippages and continued focus on other income and CASA growth.

Strategic Initiatives and Diversification

The bank is strategically diversifying its portfolio, with the secured book growing 29% YoY and now constituting 52% of total advances. Non-EEB portfolio grew 27% YoY, driven by retail assets (78% YoY growth), wholesale banking (32% YoY growth), and housing (15% YoY growth). Initiatives include enabling all 4,400 banking units to offer retail term deposits, with over 2,000 units already active. The 'ONE BANDHAN' initiative generated INR 4,200 crores in incremental retail term deposits, and new products like Elite and Elite Plus Savings Accounts were launched for HNI segments.

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