Recommendation From Banking Sectors

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year

Bandhan Bank 

BSE Code: 541153
CMP: Rs 556
FV: Rs 10
BSE Volume: 76,931

A STRONG 'BANDHAN' TO BANK ON 

HERE IS WHY Strong balance sheet Gaining market share in micro loans Aims to open 40 new branches 

Bandhan Bank Limited is a commercial bank which offers a range of asset and liability products and services designed for micro banking and general banking, as well as other banking products and services. Its asset products consist of retail loans including a substantial portfolio of micro loans, as well as micro, small and medium enterprise (SME) loans and small enterprise loans. Its liability products consist of savings accounts, current accounts and a variety of fixed deposit accounts. The bank also offers debit cards, internet banking, mobile banking, electronic data capture-point of sale (EDC- POS) terminals, online bill payment services and the distribution of third-party general insurance products and mutual fund products. 

On the financial front, on a standalone basis, the interest earned by the bank has climbed 43.35 per cent up and came in at Rs 1605.641 crore in Q2FY19 as against Rs 1120.12 crore in the same quarter of the previous year. The total income of the bank expanded by 36 per cent to reach Rs 1836.07 crore in Q2FY19 as against Rs 1342.76 crore accumulated in the same quarter of the previous year. The profit after tax (PAT) came in at Rs 487.65 crore in the second quarter of FY19, witnessing a growth of 47 per cent from Rs 331.03 crore in Q2FY18. 

On the annual front, the company observed a 23 per cent expansion in the interest earned as it came in at Rs 4802.30 crore in FY18 as against Rs 3908 crore in FY17. The bank posted total income of Rs 5508.48 crore in FY18, reflecting a 28 per cent jump from Rs 4320.12 crore in FY17. The PAT has ascended 21 per cent in FY18 to reach Rs 1345.56 crore as compared to Rs 1111.95 crore in FY17. After the RBI’s restriction on branch expansion, Bandhan Bank has sought permission from the RBI to open almost 40 branches. This could be a key trigger for Bandhan Bank as it would help the bank to keep its growth engine running. The bank has said that it aims to open these branches by the end of this calendar year. 

The recent liquidity crunch, which led to slowdown in NBFCs, is likely to help the bank gain market share in micro-loans. Bandhan Bank holds a healthy market share of 20 per cent in the overall micro-loans outstanding. 

For almost 70-75 per cent of its borrowers, Bandhan Bank is the only lender. The bank’s management believes that this would enable them to leverage customer relationships when it comes to collections and is one of the foundations of its healthy asset quality. The bank has strong balance sheet and asset quality amongst the overall banks. Net NPAs as on Q2FY19 stood at comfortable level of 0.69 per cent, while its capital adequacy stood at 32.60 per cent.

 

Looking at the above mentioned factors, we recommend you to BUY Bandhan Bank at the current levels and reap the benefits in the long run.