Bandhan Bank surges after research companies rate the company as a 'buy,' with a 42% upside

Bandhan Bank shares rose more than 4% in the morning session on January 23 after global research companies awarded the company a 'buy' rating with up to 42 percent upside.

Bandhan Bank was trading at Rs 248.00 on the BSE at 9:40 a.m., up Rs 10.95, or 4.62 percent. It reached an intraday high of Rs 249 and a low of Rs 239.85.

Bandhan Bank reported a 66 percent decline in net profit for the December quarter (Q3FY23) to Rs 290.57 crore on January 20 due to a steep increase in provisions and overall expenditures. A year ago, the lender made Rs 858.97 crore in profit. Its overall expenditure increased by 34.65% year on year to Rs 2,918.77 crore. Provisions and contingencies increased 91.32 percent year on year to Rs 1,541.49 crore from Rs 805.71 crore.

Net Interest Money (NII), or the income a bank generates from lending, declined by 2.1 percent year on year to Rs 2,080.43 crore. Other income climbed by roughly 45.74 percent year on year, reaching Rs 1,033.30 crore.

Non-performing assets at the lender improved. Gross non-performing assets (GNPAs) declined 26.23 percent to Rs 6,964.76 crore, compared to Rs 9,441.57 crore in the same quarter last year.

JP Morgan rates the stock as 'overweight,' with a target price of Rs 350 per share, representing a 42 percent increase over the current market price. The brokerage business believes that Q3 results were in line, with the primary positive being a dramatic decrease in slippages outside of the watchlist.

"More than 90% of slippages were flowing from the stress book, where the bank has extensive coverage. In the December 2022 analyst meeting, the overall MFI stress book was lower than expected. The collection efficiency of the bank has essentially returned to pre-Covid levels.

CLSA has a 'buy' recommendation on the company, with a target price of Rs 320 per share. According to the brokerage business, NII missed estimates and overall performance was modest, while SMA book and un-provided stress were down.

"MFI asset quality will return to normal in Q4, resulting in a normalised Return on equity (RoE). We have reduced our FY24-25 predictions by 4-6 percent to account for slower balance-sheet growth as confidence in a cyclical MFI recovery grows "It stated.

Bandhan Bank is also rated 'buy' by Jefferies, with a target price of Rs 340 a share. According to the worldwide research organisation, Q3 earnings was slightly higher, but slippages and credit expenses were major drags. It anticipates that the normalisation of credit costs will fuel a resurgence in earnings/ROE.

"Lending rate increases may boost NIMs in H2 and result in long-term improvements in CASA growth. Valuations are appealing and can re-rate as RoE returns to 20% "said Jefferies.