Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bandhan Bank Ltd (BOM:541153, Financial) reported a profit after tax of INR937 crores for Q2 FY25, marking a 30% year-on-year increase.
- The bank's net interest margin (NIM) remained healthy at 7.4%, despite a competitive deposit market and changes in product mix.
- Deposits grew by 27.2% year-on-year, reaching INR1.43 lakh crores, with a stable retail deposit share of 68%.
- The secured book now constitutes 47% of advances, up from 42% in March 2024, reflecting a strategic shift towards more secured lending.
- The bank's transformation program, including intelligent automation and AI adoption, is expected to drive greater efficiency and enhance customer experience.
Negative Points
- Gross NPA increased to 4.7% in Q2 FY25 from 4.2% in the previous quarter, indicating a deterioration in asset quality.
- The microfinance sector continues to face headwinds, with elevated risks impacting portfolio quality and leading to increased slippages.
- Credit costs for the quarter were at 2%, with expectations of elevated slippages and credit costs continuing into Q3 FY25.
- The cost of funds has increased due to a competitive deposit market, impacting the bank's overall cost structure.
- The bank's collection efficiency in the EEB book declined to 98.1% in Q2 FY25 from 98.7% in Q1 FY25, reflecting stress in the microfinance segment.
Q & A Highlights
Q: How should we think about slippages in the coming quarters, and what percentage of your customers are overdue but still paying their EMIs?
A: Slippages are expected to remain elevated in Q3, similar to Q1. The bigger problems are in specific geographies. The DPD pool, including SMA-0, SMA-1, and SMA-2 buckets, has seen an elevation, especially in the microfinance sector. The credit cost guidance remains at 1.8% to 2% for the full financial year, with expectations of improvement by Q4.
Q: What percentage of your customers are unique to Bandhan Bank, and how many have additional lenders?
A: Bandhan Bank Unique customers are 60%; Bandhan Plus 1 is 80%; and Bandhan Plus 4 and above is 4.5%. This indicates that 60% of customers have Bandhan as their sole lender.
Q: Can you explain the significant increase in the "others" line item in your non-interest income?
A: The increase includes a one-off income of INR80 crores from treasury operations, including profit on sale of investments and revaluation gains. Additionally, there are usual charges like average quarterly balance charges contributing to the higher figure.
Q: How is the asset quality in your commercial banking segment, and what is your exposure to NBFC MFI corporates?
A: The asset quality in the commercial banking segment is strong, with 93% rated A- and above. The exposure to NBFC MFI corporates is INR3,000 crores. The focus is on growing secured assets and leveraging customer relationships for additional income streams.
Q: How do you view the disbursement in the MFI segment going forward, especially during the festive season?
A: The bank plans to be more cautious and focus on secured growth. While Q3 and Q4 are traditionally better quarters, the bank will maintain a watchful approach due to elevated industry risks. Growth in the microfinance portfolio will be carefully managed, with a focus on existing customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
