Emkay Global Financial has given Buy recommendation for Bandhan Bank with a target price of Rs. 500 in its research report issued on Apr 13, 2021

Emkay Global Financial’s report on Bandhan Bank

Bandhan Bank has reported better-than-expected AUM growth of 21% yoy/8% qoq to Rs802bn (provisional) on a high base, primarily driven by better disbursement trends in MFI, small business loans and mortgages, in our view. Q4 is seasonally a strong quarter for lenders with a sizeable MFI portfolio. Creditaccess (18% yoy/14% qoq), Ujjivan (7% yoy/11% qoq) and Satin Creditcare (1% yoy/5% qoq) too have reported healthy growth, as per their business updates. Deposits growth remained strong at 37% yoy/10% qoq to Rs780bn (a phenomenon seen across banks), given the bank’s strong liability franchise. CASA ratio improved by 50bps qoq/660bps yoy to 43.4%. Deposits are now 90% of AUM vs. 79% in Q4FY20, leading to lower CoF and thus being structurally long-term positive for NIMs.


We like Bandhan’s strategy to diversify the asset portfolio away from MFI (product as well as geography-wise) in the wake of rising adverse asset quality events while creating strong provisioning/capital buffers. After the recent correction, the stock is trading at reasonable valuations of 2x FY23 ABV. Currently, we have a Buy rating on the stock.