Bandhan Bank - Darkest Before Dawn: Motilal Oswal
The bank has been dealing with higher stress in the EEB book emanating from high SMAs and bulky restructured portfolio.
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Motilal Oswal Report
Bandhan Bank Ltd. has been taking it on the chin as the bank continuously cleanses its balance sheet with emerging entrepreneurs business stress pool moderating to Rs 95 billion (17.6% of EEB loans) in Q2 FY23 from a peak of Rs 195 billion (36.1% of EEB loans) in Q2 FY22, while its restructured book has dissolved completely.
Special mention account book though remains elevated, has moderated to 13.1% from a peak of 37.1% in Q1 FY22. We note that slippages in Q2 FY23 formed ~78% of the SMA book in Q1 FY23 and thus we expect slippages to remain elevated over Q3 FY23/Q4 FY23.
While Bandhan Bank is carrying a healthy coverage that includes potential recoveries, any timing mismatch in recoveries may severely impact the credit cost trajectory and keep provisions elevated as a bulk of recoveries is likely over Q4 FY23/Q1 FY24.
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