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

Q3 Results: Bandhan Bank’s Provisions Double On IL&FS Exposure 

Bandhan Bank Ltd.’s provisions more than doubled in the third quarter, slowing its profit growth.

Profit rose 10.4 percent year-on-year to Rs 331.3 crore in the three months ended December, according to the microlender-turned-commercial bank’s exchange filing. That’s because the bank’s provisions jumped to Rs 377.6 crore from Rs 124.2 crore in the previous quarter.

Provisions worth Rs 384.95 crore were made towards a large corporate account from the infrastructure and finance sector, Chandra Shekhar Ghosh, managing director and chief executive officer at Bandhan Bank, said in a post-earnings press conference. The account, which the lender had earlier identified as IL&FS, was recognised as a non-performing asset in the third quarter, Ghosh said. “This impacted profit growth.”

[We] had tested waters with one large corporate account. But that failed. We will not repeat this.
Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank

As a result, gross bad loans rose to 2.41 percent as of December compared with 1.29 percent in September. Net NPA ratio was stable at 0.7 percent versus 0.69 percent a quarter earlier.

  • Net interest income, or the core income of the lender, surged 53.6 percent year-on-year to Rs 1,124 crore.
  • The ratio of current and savings account deposits rose to 41.4 percent from 33.2 percent a year earlier.
  • The bank’s capital adequacy ratio improved to 32.8 percent from 24.9 percent in the year-ago period.

Bandhan bank announced a merger with Gruh Finance Ltd. in a share-swap deal on Monday to bring down promoter shareholding in line with the Reserve Bank of India’s norms, after the central bank placed restrictions on its operations.

Shares of the lender rose as much as 4.2 percent after the earnings were announced. That compared with a 0.6 percent decline in the Nifty Bank Index as of 2 p.m.

Other Highlights From Post-Earnings Conference

  • Non-micro credit loans fell slightly.
  • The lender has not received any communication from the RBI on easing the restrictions placed on it.
  • Gruh Finance is a big opportunity to grow the bank in different geographies.

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