Bandhan Bank shares tumble 15% after Q1 results; lender flags NIM pressure, cuts RoA guidance
Mumbai, July 22
Shares of Bandhan Bank slumped nearly 15 per cent on Wednesday after the private sector lender reported its June quarter earnings and warned that net interest margins are likely to remain under pressure over the next two quarters, prompting it to lower its profitability guidance for FY27.
During its post-results conference call, the bank revised its exit return on assets (RoA) guidance for the fourth quarter of FY27 to 1.2-1.4 per cent from the earlier 1.6-1.8 per cent, citing persistent pressure on margins and elevated operating expenses.
Management attributed the downward revision to a challenging external environment marked by elevated funding costs, geopolitical tensions in West Asia, energy price volatility, unpredictable monsoons and higher technology investments.
The bank said around 40 basis points of the reduction in the guided RoA would stem from margin pressures, while another 10 basis points would be due to higher operating expenses on technology initiatives such as loan origination systems (LOS) and digital infrastructure.
The lender said its NIM remained stable sequentially at 6.2 per cent in the June quarter but cautioned that elevated funding costs would weigh on margins going forward.
Equirus Securities, in its post-results report, noted that "NIM remained stable qoq at 6.2%, but elevated CoF and deposit competition are expected to pressure margins," while adding that management expects higher cost of funds to keep margins under strain.
The brokerage also highlighted the impact of the revised profitability outlook, saying, "Management maintained opex-to-assets guidance at 4.2% but lowered its RoA target to 1.2-1.4% (from 1.6-1.8%), reflecting a 30bps hit from margin pressure and 10bps from higher opex."
According to the bank, higher operating expenditure is being driven by continued investments in technology, including cloud infrastructure, hardware, software and loan origination platforms, even as these investments are expected to improve operating efficiency over the medium term.
Despite the near-term profitability pressure, the bank maintained its guidance for around 14 per cent credit growth in FY27, with non-emerging entrepreneurs business (non-EEB) expected to drive growth while the EEB portfolio remains under a cautious approach amid macroeconomic uncertainties. The bank also continues to target a higher share of secured loans in its portfolio.
At the time of reporting, Bandhan Bank stock was trading at Rs 176.99, down by 15.25 per cent.
— ANI
Reader Comments
This is exactly why I avoid microfinance-heavy banks. The NIM guidance cut from 1.6-1.8% to 1.2-1.4% is massive — almost 30-40 basis points erosion. And they are still targeting 14% credit growth? That seems optimistic given the environment. The stock has been falling like a stone since its IPO days. Good for long-term if you have patience, but short-term traders beware. 📉
As someone working in banking, I find this revision quite concerning. The fact that 40bps of the RoA cut is due to margin pressure and another 10bps due to higher opex on tech means the core business is under real strain. Banks can't just throw money at technology and expect instant results — they need better risk management, especially in the microfinance segment. The stock might find support around ₹160-170 levels.
Bandhan Bank's story has always been about the microfinance business, but now even that is under pressure. The management says they are being cautious on EEB portfolio — that's good, but the non-EEB growth alone won't move the needle. I think the market is pricing in more pain ahead. Let's see if the stock stabilizes after this fall or if there is more downside. Personally, I would wait for the next quarter results before even thinking of entering.
I have a small position in Bandhan Bank and this drop hurt. 😬 But looking at the fundamentals, the bank still has a decent NIM of 6.2% and is investing heavily in tech. The RoA target revision is disappointing, but if they can execute on their strategy and improve efficiency over the next 2-3 years, the long-term story might still work. Key risk is the microfinance segment — any stress there will hit them hard. For now, holding and watching.