Bandhan Bank Q3 Results: Net Profit Declines 13.5% On Higher Provisions
The $3.2 billion merger between Bandhan Bank and Gruh Finance was the biggest M&A deal struck in the first quarter of 2019.

Bandhan Bank Q3 Results: Net Profit Declines 13.5% On Higher Provisions

Bandhan Bank Ltd.’s quarterly profit fell on higher provisions.

Net profit fell 13.5% year-on-year to Rs 632.6 crore in the quarter ended December, according to the private lender’s exchange filing.

  • Net interest income rose 34.5% from a year ago to Rs 2,071 crore.
  • Other income rose 55% year-on-year to Rs 553 crore.

Bandhan Bank’s total advances rose 23% year-on-year and 4.7% sequentially to Rs 80,260 crore as on Dec. 31, 2020. Micro credit loans, including loans to businesses and individuals, comprised 85% of its loan book.

Total deposits rose 7.6% sequentially to Rs 71,190 crore.

The bank’s gross non-performing asset ratio stood at 1.11% as on Dec. 31 against 1.18% as on Sept. 30., owing to the Supreme Court's directions in the interest-on-interest case that barred lenders from classifying any account as NPA after Aug. 31.

If the apex court’s directions weren’t in place, Bandhan Bank’s gross NPA ratio would have risen significantly to 7.12% from 1.5% at the end of the second quarter. The proforma net NPA would have been at 2.36% as compared with 0.72% a quarter ago.

“We’re seeing that while a lot of our customers are making repayments, they are making part payment of their dues. Because of this there is a gap in time before their accounts are fully regularised,” said Sunil Samdani, chief financial officer, Bandhan Bank. “But this doesn’t mean that we take these accounts as loss given default.”

According to Samdani, the bank isn’t considering these borrowers as non-performing and is expecting repayments to regularise soon.

The bank said it made Rs 1,000 crore worth accelerated provisioning against stressed accounts owing to the Covid-19 pandemic during the October-December period, compared with Rs 300 crore in the three months through September. Total standard asset provisions have now risen to Rs 3,120 crore, the bank said.

Collection Efficiency Drops In January

As of Dec. 31, Bandhan Bank’s total collection efficiency was 94% by number of customers, while on loan value it stood at 92%. In the first 15 days of January 2021 though, the efficiency has deteriorated to 92% and 90% respectively.

Collection efficiency especially in states like West Bengal and Assam have suffered. In West Bengal, while collection efficiency fell marginally to 89% in the first 15 days of January from about 90% in December, Assam saw the efficiency deteriorate to 78% from 88% in the corresponding period.

Assam has seen a drop in collection efficiency due to factors such as the state government greatly curbing recovery practices by lenders and waiver talks picking up ahead of state elections. At the end of the third quarter, Bandhan Bank’s total exposure in Assam stood at Rs 6,917 crore, which is about 8% of the bank’s total loan portfolio, said CS Ghosh, the lender’s managing director and chief executive.

“We aren’t seeing any more Covid-related curbs on movement in the rural areas anymore,” Ghosh said. “Our expectation is in the next two to three months collection efficiency should improve.”

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