The Prabhadevi Branch of Bandhan Bank. (Photographer: Anirudh Saligrama/BloombergQuint)

Bandhan Bank Profit Rises 20% Even As Microfinance Bad Loans Spike

Microlender-turned commercial bank Bandhan Bank Ltd. today posted a 20.3 percent profit growth in March quarter to Rs 388 crore, but reported a fourfold spike in bad loans in its core micro-lending portfolio.

For the entire fiscal year 2018, the Kolkata-based bank, which went public last month, reported a 21 percent growth in bottom line to Rs 1,346 crore. The bank said that the overhang of the note-ban, Goods and Services Tax implementation and farm loan waiver is still visible in the micro-lending segment which constitutes as much as 72 percent of its assets.

As against a historical average of about 0.4 percent, its gross non-performing assets ratio more than trebled to 1.25 percent during the quarter.

Managing Director and Chief Executive Chandra Shekhar Ghosh said that the stress continues in the micro lending segment, but signalled that the stress is declining, evident in its gross bad loan ratio of 1.67 percent in the December quarter. The bank had to write off Rs 51 crore of advances in financial year 2018 because of the stress, he added.

Provisions shot up nearly threefold to Rs 109.08 crore from Rs 36.44 crore in the year-ago period. Core net interest income grew 25.2 percent to Rs 863 crore in the reporting quarter, while non-interest income, earned primarily through distribution of financial products like mutual funds, soared 57.4 percent to Rs 203 crore.

Also read: Bandhan Bank Is India’s Eighth Largest Lender By Market Value

Other Financial Highlights:

  • Advances grew by 37.4 percent, while deposits rose 45.8 percent.
  • Net interest margin improved to 9.3 percent from 10.7 percent, as the lender’s non-MFI book grew to 28 percent.

Chief Financial Officer Sunil Samdani said 95 percent of overall advances classify as priority sector lending and the manner in which they were monetised also had a bearing on the margins. He added that 90 percent of such “downselling” in year ended March 2018 was through the priority sector lending certificate route which bloats the fees but trims the margin.

The bank is targeting to “minimise” its bad loans ratio and relying more on tracking the daily on-time payment data to achieve the goal and deploying more field force, said Ghosh.

The bank scrip closed 2.04 percent higher at Rs 504.90 on the BSE as against a 0.74 percent gain on the benchmark.