ICICI Direct Maintains Buy Rating for Bandhan Bank, Targets Rs 230

Bandhan Bank Reports Strong Q4FY26 Performance, Guides for FY27 Growth

Bandhan Bank, a prominent banking institution, has reported a significant improvement in its Q4FY26 performance. The bank's Profit After Tax (PAT) stood at INR 5.3 billion, marking a substantial increase of 160% on a quarter-on-quarter (QoQ) basis. This growth is attributed to lower credit costs, resulting from improved slippages and contained write-offs. In contrast, the bank's Profit Before Other Non-Interest Income (PPOP) remained flat QoQ.

The bank's Economic Efficiency Ratio (EEB) exhibited growth, increasing to 8% QoQ after multiple quarters of stability. A notable improvement was observed in EEB slippages, which reduced to a multi-quarter low of approximately 5.1%. The bank's Standardized Mean Absolute Deviation (SMA) pool also showed improvement, decreasing to 3.1% from 4.6% QoQ. Furthermore, the bank reported negligible stress formation.

For the upcoming fiscal year, Bandhan Bank has guided for a loan growth of 14-15%. The bank expects Net Interest Margin (NIM) to rise, contributing to an improvement in Return on Assets (RoA) to 1.6-1.8% by the end of FY27. This projected growth is driven by credit cost moderation and fee income growth.

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Outlook and Recommendations

Given the bank's strong performance and growth prospects, ICICI Direct's research team maintains a BUY rating on Bandhan Bank. The recommended target price has been increased to INR 230, based on an estimated 1.3x (0.9x) of the bank's Adjusted Book Value (ABV) for FY28.