HOLD

Company Update Bandhan Bank Ltd. Target Price

9th April, 2024 BFSI - Banks 175

MD CEO’s Resignation Raises Concerns on Future Prospects! (CMP as of 08 April, 2024)

 Mr Chandra Shekhar Ghosh has resigned from the post of MD & CEO of the bank CMP (Rs) 185

with the intent to retire and assume a more strategic role at Bandhan HoldCo. level. Upside /Downside (%) (-5%)
High/Low (Rs) 272/173
This development comes shortly after the board had recently approved the
Market cap (Cr) 29,795
extension of Mr Ghosh’s term as MD CEO for another 3 years in Nov’23. Avg. daily vol. (6m) Shrs. 1,30,38,261
No. of shares (Cr) 161.1
 The bank has set up an internal search committee to identify a new MD CEO. The
Shareholding (%)
search committee will identify the new candidate and will submit the proposal to the
Jun-23 Sep-23 D ec-23
regulator. Post the completion of Mr Ghosh’s term in Jul’24, Bandhan will Promoter 40.0 40.0 40.0
have an interim MD-CEO until approval from the regulator on the names FIIs 33.5 32.8 34.8

submitted by the bank. MFs / FIs 7.5 8.5 9.6

Others 19.0 18.7 15.6

 The resignation comes as a negative surprise, especially at a time when the bank Financial & Valuations
continues to grapple with COVID-related stress in terms of asset quality and a Y/E Mar (Rs Cr) FY24E FY25E FY26E
NII 10,218 12,298 14,583
slower recovery than peers. Additionally, Bandhan is currently undergoing a
PPOP 6,690 8,215 9,878
forensic audit on a portion of the bank’s loan book (~Rs 230 Bn), the outcome of Net Profit 3,067 4,196 5,078
which is expected in the next 1-2 months. EPS (Rs) 19.0 26.0 31.5
ABV (Rs) 122.6 145.9 174.0
P/ABV (x) 1.5 1.3 1.1
 Before Mr Ghosh’s retirement, the bank has seen multiple senior-level exits in the
RoA (%) 1.9 2.2 2.3
last couple of years, which we believe has to an extent hampered the perception of NNPA (%) 2.1 1.8 1.5

the bank. Amongst the many new hires are 2 Executive directors - Mr Ratan Change in Estimates (%)
Kumar Kesh and Mr Rajinder Kumar Babbar along with the newly inducted CFO Mr Y/E Mar FY24E FY25E
NII - -
Rajeev Mantriand a Head – Retail Banking, Chief Information Officer and Chief
PPOP - -
Compliance Officer. PAT - -

ESG disclosure Score**

 In the conference call to discuss the recent developments, Mr Ghosh assured that
Environmental Disclosure 2.4
the strategic plan for the bank is in place and the senior management team Social Disclosure Score 26.8
continues to remain strong and capable of driving growth. While the senior Governance Disclosure Score 78.6

management team has rich professional experience, it cannot be ruled out that Total ESG Disclosure Score 36.0
Sector Average 38.8
many of the senior management team members’ association with the bank
Source: Bloomberg, Scale: 0.1-100

has not been for very long. **Note: This score measures the amount of ESG data a company reports
publicly and does not measure the company's performance on any data
point. All scores are based on 2022 disclosures

Relative Performance

Outlook & Recommendation 135

115
Bandhan continues to grapple with asset quality concerns, especially in the EEB book,
95
while most of its peers have shown remarkable improvement in asset quality. While the 75

Q4FY24 provisional numbers indicate strong growth in terms of both advances and 55
Feb-23
Mar-23

Feb-24
Mar-24
May-23
Jan-23

Jun-23

Jan-24
Oct-22

Apr-23

Oct-23
Nov-22
Dec-22

Nov-23
Dec-23
Sep-22

Jul-23
Aug-23
Sep-23

deposits and collection efficiency remaining steady at ~99% in both the EEB and non-
EEB segments, the uncertainty around the management succession and the Bandhan Bank SENSEX
Source: AceEquity, Axis Securities
potential challenges in terms of growth strategy for the bank will result in a further
de-rating of the stock. We maintain our estimates currently and will revise them Dnyanada Vaidya
Research Analyst
post the Q4FY24 results. Email: [email protected]
We revise our rating from BUY to HOLD lowering the valuation multiple from 1.5x
Prathamesh Sawant, CFA
Sep’25E ABV to 1.1x Sep’25E ABV. We arrive at a target price of Rs 175/share, Research Analyst
implying a downside of ~5% from the CMP. Email: [email protected]

CA Bhavya Shah
Research Associate

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Financials (Standalone)
Profit & Loss (Rs Cr)
Y/E March FY23 FY24E FY25E FY26E
Net Interest Income 9,260 10,218 12,298 14,583
Other Income 2,469 2,077 2,434 2,886
Total Income 11,728 12,295 14,731 17,469
Total Operating Exp 4,637 5,604 6,517 7,591
PPOP 7,091 6,690 8,215 9,878
Provisions & Contingencies 4,198 2,634 2,664 3,162
PBT 2,893 4,056 5,550 6,716
Provision for Tax 698 990 1,354 1,639
PAT 2,195 3,067 4,196 5,078
Source: Company, Axis Securities

Balance Sheet (Rs Cr)

Y/E March FY23 FY24E FY25E FY26E
SOURCES OF FUNDS
Share Capital 1,611 1,611 1,611 1,611
Reserves 17,973 20,733 24,509 29,079
Shareholder's Funds 19,584 22,344 26,120 30,690
Total Deposits 1,08,069 1,24,819 1,46,069 1,71,319
Borrowings 24,711 22,537 28,500 34,885
Other Liabilities & Provisions 3,406 3,793 4,486 5,295
Total Liabilities 1,55,770 1,73,494 2,05,176 2,42,189

APPLICATION OF FUNDS
Cash & Bank Balance 8,250 7,913 9,227 10,332
Investments 32,366 32,514 38,050 44,627
Advances 1,04,757 1,21,833 1,44,614 1,71,548
Fixed Assets & Other Assets 10,398 11,234 13,285 15,682
Total Assets 1,55,770 1,73,494 2,05,176 2,42,189
Source: Company, Axis Securities

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Ratio Analysis (%)
Y/E March FY23 FY24E FY25E FY26E
VALUATION RATIOS
EPS 13.6 19.0 26.0 31.5
Earnings Growth (%) 1645 40 37 21
BVPS 121.6 138.7 162.2 190.5
Adj. BVPS 114.0 122.6 145.9 174.0
ROAA (%) 1.5 1.9 2.2 2.3
ROAE (%) 11.9 14.6 17.3 17.9
P/E (x) 13.6 9.7 7.1 5.9
P/ABV (x) 1.6 1.5 1.3 1.1

PROFITABILITY
NIM (%) 7.2 7.2 7.4 7.4
Cost-Income Ratio 39.5 45.6 44.2 43.5

BALANCE SHEET STRUCTURE RATIOS

Loan Growth (%) 11.5 16.3 18.7 18.6
Deposit Growth (%) 12.2 15.5 17.0 17.3
Equity/Assets (%) 12.6 12.9 12.7 12.7
Equity/Loans (%) 18.7 18.3 18.1 17.9
CAR 19.8 19.5 18.9 18.3
CAR Tier I 18.7 18.6 18.0 17.6

ASSET QUALITY
Gross NPLs (%) 4.9 6.8 5.8 5.0
Net NPLs (%) 1.2 2.1 1.8 1.5
Coverage Ratio (%) 76.8 70.0 70.0 70.0
Credit Costs 4.2 2.3 2.0 2.0

ROAA TREE
Net Interest Income 6.3 6.2 6.5 6.5
Non-Interest Income 1.7 1.3 1.3 1.3
Operating Cost 3.1 3.4 3.4 3.4
Provisions 2.8 1.6 1.4 1.4
Tax 0.5 0.6 0.7 0.7
ROAA 1.5 1.9 2.2 2.3
Leverage (x) 8.0 7.9 7.8 7.9
ROAE 11.9 14.6 17.3 17.9
Source: Company, Axis Securities

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 Bandhan Bank Price Chart and Recommendation History

(Rs)

Date Reco TP Research

24-Jan-22 HOLD 275 Result Update
16-May-22 BUY 400 Result Update
25-Jul-22 BUY 350 Result Update
31-Oct-22 BUY 305 Result Update
23-Jan-23 BUY 275 Result Update
22-May-23 BUY 275 Result Update
17-Jul-23 BUY 255 Result Update
19-Oct-23 HOLD 250 Result Update
12-Feb-24 BUY 240 Result Update
09-Apr-24 HOLD 175 Company Update

Source: Axis Securities

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About the Analyst

Analyst: Dnyanada Vaidya

Contact Details: [email protected]

Sector: BFSI

Analyst Bio: Dnyanada Vaidya is MMS (Finance) with over 6 years of research experience in the
Banking/NBFC sector.

About the Analyst

Analyst: Prathamesh Sawant, CFA

Contact Details: [email protected]

Sector: BFSI

Analyst Bio: Prathamesh Sawant is MBA (Finance) and CFA Charter holder with over 7 years of experience
in Equity Research & Valuation.

About the Associate

Associate: CA Bhavya Shah

Contact Details: [email protected]

Sector: BFSI

Analyst Bio: Bhavya Shah is Chartered Accountant and CFA level 2 cleared with over 18 months of research
experience in the Banking/NBFC Industry.

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CHADAWAR Date: 2024.04.09
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