Bandhan Bank - On The Path To Recovery; To Diversify Loan Book Further: Motilal Oswal

Motilal Oswal Report

We believe Bandhan Bank Ltd.’s strategy to diversify away from the micro finance institution segment, focus on restoring asset quality, and pursue geographical diversification is heading in the right direction for long-term sustainability.

We note that the stock has seen significant de-rating and it now trades at 1.1 times FY26E adjusted book . The ongoing audit regarding the credit guarantee fund for micro units claim has hit sentiments and remains a major overhang on the stock performance in near term. Further, the Resreve Bank of India’s approval for a fresh CEO term is also a key monitorable.

Bandhan Bank has recently hired several key management personnel to drive its overall business performance. The management bandwidth has thus expanded with the onboarding of Mr Rajinder Kumar Babbar – ED and Chief Business Officer, Mr Ratan Kumar Kesh – ED and Chief Operating Officer, Mr Santosh Nair – Head Consumer Lending and Mortgages, and Mr Rajeev Mantri – CFO.

The bank now has two Executive Directors on the Board versus the regulatory requirement of having a minimum of one ED.

We expect Bandhan Bank to deliver steady improvement in return on asset/return on equity to about 2%/17% by FY26, driven by loan growth recovery, moderation in credit costs, and largely stable margins.

We reiterate our Neutral rating on the stock with a target price of Rs 220 (based on 1.3 times FY26E ABV).

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