Home / Markets / Stock Markets /  Bandhan Bank nosedives 7% in 1 day. Should you buy the stock at dip?

Kolkata-based Bandhan Bank witnessed a steep selloff on Monday with shares nosediving by nearly 7%. The bearish tone in Bandhan can be attributed to the overall downside in banking stocks as broader markets crash tracking weak global cues. Banking stocks were the worst hit with a broad-based selloff recorded across the basket. However, ICICI Securities has given a 'buy' recommendation on Bandhan Bank with a target price of 408 apiece.

On BSE, Bandhan Bank shares closed at 261.50 apiece down by 5.97%. The stock tumbled by at least 6.8% on the day by clocking an intraday low of 42,122.89 crore.

The bank's market cap is around 42,122.89 crore.

Last week, on Friday, Bandhan Bank shares stood at 278.10 apiece.

Should you buy Bandhan Bank shares?

ICICI Securities Research Analysts Kunal Shah, Renish Bhuva, and Chintan Shah in their report on Bandhan Bank said, "Consensus expectations were set lower for Bandhan Bank following a series of events in Q1FY23. GNPA and SMA-2 trends in Q2FY23 are not expected to be encouraging given the lagged effect of Assam floods and forward flow from the restructured pool. Seasoning of the portfolio within the stress pool towards higher delinquency buckets was expected to lead to the upfronting of the larger part of the bank’s credit cost guidance (of 2.5%) in H1FY23. Pause in PSLC sale due to declassification of loans under certain PSL categories suggests pressure on fee income."

In the first quarter of FY23, Bandhan Bank registered a PAT of 886.5 crore up by a whopping 137.6% from 373.1 crore in Q1FY22. Net interest income (NII) stood at 2,514.4 crore soaring by 18.9% from 2,114.1 crore in Q1 of FY22.

As of June 30, 2022, the bank's total advances grew by 20.3% yoy to 96,649.7 crore, while deposits jumped by a similar level of 20.3% yoy to 93,057 crore. GNPA as on June 30, 2022, improved to 7.25% against 8.18% as on June 30, 2021. Also, Net NPAs bettered to 1.92% against 3.29% of Q1FY22. There was sharp decline in provisions by 56% yoy to 642.4 crore.

The analysts' report pointed out that Bandhan is looking to open over 500 branches in FY23 of which a predominant share would be outside its key states of Assam and West Bengal. Also, the bank is investing heavily in technology.

They said, "All this would require incremental opex, hence the guidance of opex to assets in the range of 2.6-2.7% should hold, in our view."

Further, the analysts report said, "Nonetheless, on disbursement and collection efficiency, we expect a trend towards normalisation post the Q1FY23 disruption due to revised RBI regulations and Assam floods. We are constructive on mortgage lending growth as well. Positively, incremental requirement for RIDF investment, or PSL certificate buyout, would be minimal given no further PSL declassification. Increased franchise investment will likely continue. Maintain BUY with a revised target price of Rs408 (earlier Rs414) assigning 2.5x FY24E book."

By end of June 2022 quarter, Bandhan Bank's banking outlet stood at 5,640. The network consists of 1,190 branches, and 4,450 banking units as against 1,152 branches and 4,422 banking units as on June 30, 2021. Total number of ATMs stood at 429 as on June 30, 2022 against 487 as on June 30, 2021. During the quarter, the number of employees of the bank has gone up from 60,211 to 61,247.

In July, the bank opened its first-ever currency chest in Deedargunj, Patna. This will help the Bank in cash management for the branches and ATMs in the city.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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