CLSA has issued a positive outlook on a leading banking stock, predicting a 50 percent upside potential. The firm’s optimistic forecast highlights the stock’s growth prospects, with a target price suggesting significant returns. Investors may want to keep an eye on this banking stock, which is expected to perform strongly in the near future.
Share Price Movement
During Thursday’s trading session, Bandhan Bank Ltd’s share price hit an intraday high of Rs.148.40 apiece, falling slightly from the previous close of Rs.148.56 apiece. The share has retreated even further and is currently trading at Rs.147.21 per share.
Brokerage Outlook
Shares of private lender Bandhan Bank Ltd. are expected to attract attention during Tuesday’s trade following a strong endorsement from foreign brokerage house CLSA, which has maintained its “high conviction outperform” rating on the stock. CLSA has set a price target of Rs.220, suggesting a potential upside of 50 percent from Tuesday’s closing levels.
In the microfinance (MFI) segment, the bank has seen improved collection efficiency over the past two months, which has led to a reduction in overdue formations on a quarter-on-quarter basis. While disruptions are expected in the next quarter due to new regulatory guardrails, such as the three-lender cap, the management anticipates complete normalcy by Q3FY26.
Bandhan Bank’s management has outlined key priorities, including increasing the share of secured assets by FY27 and enhancing technology and audit functions. The recent partnership with Salesforce will implement a new loan origination system (LOS) across 1,700 branches by the next quarter, streamlining processes and increasing efficiency.
Furthermore, the bank targets a Return on Assets (RoA) of 1.8-2 percent by the end of FY27, which is slightly above CLSA’s more conservative estimate of 1.5 percent.
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Financial Overview
Bandhan Bank reported strong growth in its financial performance for the first nine months of FY25. Deposits rose by a significant 20 percent year-on-year (YoY), reaching Rs.1.41 lakh crore by December 2024. The bank’s gross advances also grew by 14 percent YoY, totaling Rs.1.32 lakh crore. Secured advances showed impressive growth, increasing by 34 percent YoY, now comprising nearly half of the total loan book.
In terms of asset quality, Bandhan Bank made notable improvements. The gross non-performing asset (GNPA) ratio reduced to 4.7 percent in Q3 FY25, compared to 7.0 percent a year ago. The net NPA stood at 1.3 percent in Q3 FY25, down from 2.2 percent YoY, reflecting better risk management and improved asset quality.
Earnings Report
According to its recent financial updates, Bandhan Bank Ltd reported consolidated revenue of Rs.5,479 crores in H1 FY25, marking a 17 percent increase from Rs.4,665 crores in H1 FY24. However, the company saw a 42 percent decrease in net profit to Rs.426 crores, compared to Rs.733 crores in the corresponding period of last year.
Ratio Analysis
The company has a Return on Capital Employed (ROCE) of 15.69 percent and a Return on Equity (ROE) of 10.49 percent. Its Price-to-Earnings (P/E) ratio stands at 9.57, lower than the industry average of 17.17. Furthermore, the company maintains a CASA ratio of 37.1, and an Earnings Per Share (EPS) of Rs.15.41.
Written by – Siddesh S Raskar
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