Stock in Action: Bandhan Bank

Unlocking Bandhan Bank's Potential: A Financial Odyssey

As the autumn leaves fall, so do the barriers for Bandhan Bank, marking a season of growth, innovation, and financial prowess. In the most recent Concall Notes of October 2023, the bank revealed a series of strategic moves and stellar performance indicators that have set the stage for an intriguing surge in its stock value.

Technological Metamorphosis: A Gateway to New Horizons

The metamorphosis of Bandhan Bank into a new core banking system is a game-changer. Successfully completing this migration opened doors to a slew of novel products and services. The launch of revamped internet banking platforms and a mobile app, adorned with improved user experiences, showcases the bank's commitment to technological excellence. Investors love a forward-looking company, and Bandhan Bank is tapping into this sentiment with its technological leap forward.

Guiding the Ship Through Financial Waters

The guidance provided by Bandhan Bank is a beacon in the financial sea. Confidence radiates as they set their sights on a credit growth target of nearly 20% YoY. What's particularly exciting is the anticipation of the festive season triggering an uptick in credit demand, a historical trend that could add substantial wind to the bank's sails.

The company's assurance of surpassing Year-To-Date (YTD) growth in the third quarter and achieving a remarkable 20% Asset Under Management (AUM) growth adds a layer of optimism. As investors gear up for the festivities, the bank positions itself to ride the wave of increased financial activity.

Macroeconomic Stability: A Steady Ship in Turbulent Waters

In the ever-fluctuating world of finance, Bandhan Bank stands on solid ground. The macroeconomic parameters of India are strong, with inflation at a manageable 5%, and a projected GDP growth of 6.5% for the fiscal year 2024. These factors contribute to the bank's stability and enhance investor confidence.

The Dance of Deposits and Advances

Bandhan Bank's dance with deposits and advances is nothing short of impressive. The focus on granular retail deposits and a retail-to-total deposits ratio of 74% speaks volumes about the bank's commitment to a stable and diverse funding base. The growth in the loan book, especially in retail assets and commercial banking, further solidifies Bandhan Bank's strategic positioning.

Financial Symphony: A Melody of Profit and Margin

Financially, the bank is hitting all the right notes. A net profit of Rs. 721 crores in Q2FY24, a YoY growth of 245%, is a symphony to investors' ears. Net Interest Income (NII) growing by 11.4% YoY, coupled with a Net Interest Margin (NIM) standing at 7.2%, indicates a well-balanced financial performance.

Branch Expansion and Digital Dominance

Adding 80 branches, achieving a branch presence in 35 out of 36 states and union territories, Bandhan Bank is spreading its wings across the nation. Simultaneously, the improvement in digital banking performance signifies an embrace of the future. Direct tax collection authorization and disbursing central civil pension further amplify the bank's role in the digital transformation of financial services.

Navigating Challenges: A Test of Resilience

The challenges faced by Bandhan Bank, such as slow growth in the housing book and the impact of industry-wide policy shifts, are navigated with strategic precision. The focus on reinstating a robust credit culture and tightening policies positions the bank for a sustainable future.

AUM Growth: Weathering the Storm

Although the AUM growth has been negative Year-To-Date, the company's unwavering confidence in achieving 20% YoY growth indicates a belief in the future. The positive trend from EEB INR2,000 crores in the second quarter hints at a potential turnaround, making the stock a tantalizing prospect for investors.

A Financial Tapestry Unravelled

In the world of finance, Bandhan Bank is weaving a captivating tapestry. From technological advancements to financial performance, the bank is showcasing resilience, adaptability, and a strategic vision. As the stock surges, investors are not just buying shares; they are investing in a financial odyssey with Bandhan Bank at the helm. The pages of this financial saga are turning, and the story is one of growth, stability, and a promising future.

Strategy for Growth

Bank has clearly laid out its vision to be an affordable financial institution by providing simple, cost-effective and innovative financial solutions in a courteous and responsible manner. It intends to create value for all stakeholders through a committed and efficient team, robust practices, superior systems and technology while continuing to deepen its customer reach.

In line with the India growth story, Bank continued on its upward trajectory in terms of extending businesses and remain in course to achieve its broad targets. Bank has been able to maintain steady growth in business through operational innovations and expanding geographical footprint:

• Bank has managed to outpace industry deposit growth as growth came in 12 per cent. YoY. This compares to around 10 per cent. YoY rise in industry-level deposits.

• The growth was driven by a high CASA ratio of 39.3 per cent. at the end of FY 2022-23 and a high share of retail deposits (71 per cent.).

• Bank is revamping its digital infrastructure at a brisk pace. Some of the key highlights in our digital banking space are as follows: – Fully Digital Saving Account Neo+. The pilot for Neo+ Account with v-KYC has been launched in August 2022 across select branches and online customers.
–New and improved CIB platform was launched in May 2022 and this platform has won the Award for “Best Digital Channel/Platform Implementation” (December 2022) by IBS Intelligence.

• Bank has maintained its pace of growth in terms of employees and geographical footprint: During the year under review, manpower has increased by 16 per cent. from 60,211 as on March 31, 2022 to 69,702 as on March 31, 2023. Your Bank has additionally enhanced its geographical network with 1,411 retail branches, 4,390 banking units and 198 home loan centres in FY 2022-23.

• The advances of Bank remained robust as growth came in at 10 per cent. YoY during the FY 2022-23. The growth was mainly driven by retail (232.5 per cent. YoY), commercial (72.4 per cent. YoY), housing (12.8 per cent. YoY) and SEBAL (18.2 percent YoY). We are set on our endeavours to up-scale the business on the back of upgrading technologies, portfolio & product diversification and competent hiring. As global macroeconomic uncertainty subsides, Bank is confident that the virtuous combination of ongoing digital transformation, incorporation of technical know-how along with competent manpower recruitment will continue to drive consistent multi-year growth.

Financial Summary

(Source:AR)

Risks & Concern

Risks and concerns Your Bank is exposed to various risks by the very nature of its business. Your Bank has put in place a comprehensive Enterprise wide Integrated Risk Management Framework supported by detailed policies and processes for management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various other risks. Please refer to the section ‘Risk Management’ of the Board’s Report for details.