Motilal Oswal: Bandhan Bank’s Liability Franchise Strong; Prudential Provisions To Aid Earnings
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Motilal Oswal Report
Bandhan Bank has provided a high quantum of provisions toward Covid-19, which affected earnings, even as net interest income/pre-provision operating profit growth held strong. The bank now holds total Covid-19-related excess standard provisions of Rs 17.7 billion (2.5% of loans) for use toward higher delinquencies once the moratorium period ends. Collection trends in the Micro Finance Institutions portfolio are improving and stood at 73% (verses 70% as of July 3, 2020).
Deposit growth stood strong, with the current and saving account ratio improving further and retail deposit proportion being largely stable. Disbursements picked up in June 2020 and were largely lent to existing customers only. We expect credit cost trends to remain elevated at 2.4% for FY21E; the bank has already incurred approximately 1.2% of this in 1QFY21
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