Partha Pratim Sengupta, Managing Director and CEO of Bandhan Financial institution believes that whereas the worst could also be behind, the following two quarters will nonetheless current challenges—notably within the microfinance section.
Nevertheless, he expects a pointy restoration from October-December 2025 quarter (Q3FY26) onwards, with asset high quality returning to pre-COVID ranges as slippages decline and the delinquency e book improves progressively.
Within the January–March 2025 quarter (Q4FY25), Bandhan Financial institution reported internet revenues of ₹3,456 crore, a revenue after tax of ₹236.7 crore, and margins of 6.7%.
Bandhan Financial institution is concentrating on a 15–16% development in advances for FY26, whereas aiming for deposit development to proceed outpacing credit score growth, sustaining the credit-deposit (CD) ratio across the present degree of 90.5%.
With a strategic shift in the direction of a extra secured mortgage e book, the financial institution expects internet curiosity margins (NIMs) to reasonable. Nevertheless, increased volumes are prone to assist general profitability.
Under are the edited excerpts of the interview:
Q: Over the previous couple of quarters, we have now seen Bandhan Financial institution recognising dangerous loans at an accelerated tempo. Have we seen the worst with these fourth-quarter numbers? Will issues look significantly better from right here on?
A: I can say the following two quarters can be difficult, however to not the extent we noticed in Q3 and This fall of FY24–25. The delinquency e book is certainly bettering, so slippages can be a lot decrease. However sure, the microfinance section—because the whole nation has been affected—we’re additionally not insulated. There can be some challenges in Q1 and Q2 of the present monetary yr, however in Q3 and This fall, we expect superb outcomes from the microfinance section.
Going ahead, issues will return to ranges we noticed about two years in the past, particularly within the pre-COVID interval. This sector is displaying enchancment, although at a barely slower tempo.
Q: Q3 numbers—that’s, October to December—must be near pre-COVID ranges by Q3?
A: We expect a lot enchancment in Q3 and This fall of the present monetary yr. In Q1 and Q2, I’d say slippages will nonetheless happen, however at a a lot decrease tempo. We’re seeing sequential enchancment in our delinquency e book, which is an excellent signal.
Q: Give us some numbers. How do you see the credit score value panning out for the rest of this yr? You’re guiding for higher occasions forward—what’s going to it seem like within the first half, and the way do you see restoration from there?
A: The credit score value for all the final monetary yr was 2.9%. Going ahead, we might finish this yr at a bit of over 2%—round 2.3%. However once more, this may depend upon varied components. First, we have now to cut back our mortgage loss provisions. That may occur, as we at the moment are adequately offered. Our Provision Protection Ratio (PCR), together with write-offs, is sort of 87%, and excluding write-offs, it is greater than 73.7%, almost 74%.
For the microfinance e book, the PCR is sort of 79%, so we’re sufficiently offered. With the advance in our mortgage e book—and as you might have seen, we have gotten extra of a common financial institution and shifting towards a secured e book—our secured e book share has elevated from 42% to 50.5% final yr. Our goal is to succeed in 55% within the subsequent 1.5 to 2 years. With this, the standard of property will enhance. The microfinance section can also be displaying indicators of enchancment. From Q3 and This fall onwards, that may replicate. Our goal is to comprise our credit score value and produce it under 2% within the subsequent 2 to three years. That’s our aim, and we’re engaged on it.
Q: So 2.9% comes all the way down to round 2.3–2.4% this yr, and over the following three years, you’re concentrating on 1.5–1.6%. Is that proper?
A: Sure, completely. That’s our near-term and longer-term steering.
Q: Two key numbers, then. What’s the advance development you expect this yr? Additionally, how do you see the web curiosity margins (NIMs) panning out?
A: Concerning advances, we’re concentrating on 15–16% development this yr. As we aimed and succeeded final yr, our deposit development will outpace advances development. We’ve got introduced the CD ratio to 90.5%, and that may largely proceed, maybe with slight variation. Concerning NIMs, as we have now been speaking since Q3, with the shift towards a secured e book, NIMs will reasonable. Nevertheless, the amount will improve, main to raised precise revenue figures.
Q: The place ought to NIMs stabilise on a steady-state foundation?
A: On this quarter, it was about 6.7%, and it could come down to six.4% or so.
Q: You talked about efficiency will return to pre-COVID ranges from Q3. What precisely does that imply?
A: By pre-COVID, I imply slippages will come down considerably, and NPAs can be contained at the next degree of management. I’m referring particularly to the microfinance sector. As for different sectors, our e book is sort of wholesome. The company e book has NPAs of simply over 1%, and in housing finance, most NPAs are legacy instances, which at the moment are being addressed. Even in wholesale banking and retail, the e book is powerful. The one concern is the microfinance section, however even there, delinquency ranges are sequentially coming down, which is a superb sign for the long run.
Q: In a short time earlier than we allow you to go—your OPEX spend has gone up, pushing the cost-to-income ratio to round 54%. What do you count on to finish the yr with? Additionally, ROAs are nonetheless subdued—the place are they headed?
A: Concerning the cost-to-income ratio, sure, This fall is all the time excessive because of year-end prices. However for the complete yr, it stood at round 48.56%, which is sort of affordable. We’ve got added folks, invested in know-how, and opened new branches. In FY23–24, we opened round 240–250 branches. These investments added to the fee, however returns will begin flowing in. Going ahead, whereas investments in folks and expertise will proceed, we count on returns to stabilise the cost-to-income ratio at round 47–48%.
On ROA, we ended the yr at 1.5%, and our goal is to succeed in round 1.8% as quickly as attainable. This yr, we count on it to be round 1.5–1.6%, based mostly on the logic that whereas Q1 and Q2 final yr had been robust, Q3 and This fall had been difficult. This yr, Q1 and Q2 should still be powerful—however at decrease depth, and Q3 and This fall must be higher than the identical interval final yr. We’re assured about reaching 1.5–1.6% ROA this yr.
Bandhan Financial institution’s present market capitalisation is ₹26,605 crore. The inventory is at the moment buying and selling at ₹164.80 as of 10:25 am on the NSE and has declined 13% during the last yr.
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