Bandhan Bank declines 3%, hits fresh 52-week low; down 37% from Oct high

Shares of Bandhan Bank were trading lower for the third straight day, slipping 3 per cent intra-day to hit its 52-week low of Rs 411, on the BSE on Wednesday. The stock of the private sector lender was trading at its lowest level since February 5, 2019.

In the past three months, Bandhan Bank has underperformed the market by falling 27 per cent, as compared to a 2 per cent rise in the S&P BSE Sensex. It has slipped 37 per cent from its 52-week high level of Rs 650, touched on October 29, 2019.

While announcing the October-December quarter (Q3FY20) results on January 14, Bandhan Bank said that during the quarter it made additional provision of Rs 200 crore on standard advances in microfinance portfolio after evaluating risk observed in certain areas of a north-eastern state, though having a dwindling effect.

"Overall, results were largely on expected lines. However, the next 3 months would be critical in terms of portfolio performance both in Assam and West Bengal," analysts at JP Morgan said in result update.

The foreign brokerage firm further said Bandhan Bank’s entrenched franchise as the lowest-cost loan provider in high-yield MFI business in East India, ability to mobilize deposits (especially CASA) in a short period of time post Bank conversion, and our forecast of sector-high loan growth in the med-term are key investment positives.

"However, these strengths are partially offset by geographic concentration in operations and exposure to local socio-political risks inherent in the micro-loan business, modest credit profile of borrowers and potential risk of regulatory strictures linked to non-dilution of promoter holding," rating agency CRISIL had said on January 6.

Over 60 per cent of the bank's microfinance loan portfolio is concentrated in East and North-East India and about 40 per cent of its microfinance borrower base is in West Bengal alone. As borrowers have modest credit risk profiles with limited access to formal credit, variability in their income streams leading to pressure on their cash flow may affect their repayment capability, and hence, the bank's performance.

Furthermore, complying with regulatory requirement on the promoter's stake dilution, although partially addressed by Gruh's amalgamation with Bandhan, and the mode of further stake sale remain key monitorables, it added.