Bandhan Bank shares remained under heavy selling pressure on Wednesday, July 22, after the lender’s management outlined a cautious outlook for margins and profitability.
At 12:20 pm, the stock was trading at ₹173.50, down 16.92% from its previous close of ₹208.83.
Earlier in the session, the shares fell as much as 18% to an intraday low of ₹171.56 on the NSE. The stock entered the exchange’s cooling-off period after initially dropping 10%, but selling continued after trading resumed.
The decline came a day after Bandhan Bank announced its results for the April to June quarter of FY27. Although the lender reported higher profit, lower provisions and improved asset quality, investors appeared more concerned about the management’s expectations for the coming quarters.
Lower return-on-assets outlook rattles the market
The key trigger for the sell-off was Bandhan Bank’s revised return-on-assets, or RoA, outlook.
The bank now expects RoA to average between 1.2% and 1.4% by the end of FY27, compared with its earlier aspiration of 1.6% to 1.8%.
Managing Director and Chief Executive Officer Partha Pratim Sengupta attributed the revision to external pressures. He said the bank’s medium-term objective had not changed, but the current operating environment could delay the time required to reach the targeted profitability level.
RoA measures how efficiently a bank converts its assets into profit. A lower projection indicates that earnings generated from the bank’s loan book and other assets may remain under pressure.
That forward-looking warning appears to have outweighed the improvement reported in the June quarter.
Net interest margin expected to remain under pressure
The bank’s net interest margin, or NIM, outlook also emerged as a major concern.
NIM represents the difference between the interest earned on loans and the interest paid on deposits, relative to a bank’s interest-earning assets. It is a closely watched measure of core banking profitability.
JPMorgan analysts said to the Money Control that Bandhan Bank’s NIM outlook had been lowered to 6.2% from 6.5%. According to the brokerage, the revised margin estimate accounted for 30 basis points of the change in the RoA outlook, while higher technology expenses contributed another 10 basis points.
The brokerage linked the pressure to tighter liquidity, elevated funding costs and rising technology expenditure. It also said FY27 loan growth was expected to remain near the lower end of the previously indicated 14% to 15% range.
Higher deposit costs can compress margins when lending yields do not rise at the same pace. This makes the bank’s ability to attract stable, lower-cost deposits an important factor over the next few quarters.
Bandhan Bank Shares: Quarterly profit rises 35%
Despite the weak market response, Bandhan Bank reported a strong rise in net profit.
Net profit increased 35% year on year to ₹501.66 crore in the first quarter of FY27, compared with ₹371.96 crore in the same period last year.
Interest income rose 2.8% to ₹5,630.55 crore from ₹5,475.61 crore a year earlier.
The improvement in profit was supported by a sharp decline in provisions for bad loans. Provisions fell 40% to ₹682.58 crore from ₹1,146.90 crore in the corresponding quarter of the previous financial year.
While the lower provisions strengthened the quarterly bottom line, investors appeared more focused on whether weaker margins and higher costs could restrict future earnings growth.
Asset quality improves
Bandhan Bank also reported a notable improvement in asset quality.
Gross non-performing assets declined to 3.15% in the June quarter from 4.96% in the same period last year, an improvement of 181 basis points.
In absolute terms, gross NPAs fell to ₹4,880.94 crore from ₹6,622.63 crore in the corresponding quarter of the previous financial year.
The numbers indicate progress in controlling stressed loans. However, the market reaction showed that better asset quality was not enough to offset concerns around funding costs, margins and the revised profitability timeline.
Analysts offer contrasting views
The RoA guidance revision surprised some analysts, particularly because expectations had been building that supportive measures from the Reserve Bank of India could help reduce funding costs.
Nomura said the revision was unexpected, as it had anticipated some easing in funding expenses.
CLSA took a less negative view. The brokerage said its own FY28 RoA estimate was already lower at 1.3%, suggesting that Bandhan Bank’s revised guidance was broadly aligned with its existing expectations.
The differing assessments highlight the central issue facing the lender. Bandhan Bank has delivered improved profit and asset quality, but uncertainty remains over how quickly it can restore stronger and more sustainable profitability.
What the market will watch next
Investors are likely to track deposit costs, net interest margins and operating expenses closely in the coming quarters.
The bank’s ability to maintain loan growth without compromising asset quality will also remain important. Any easing in funding costs or stabilisation in margins could help rebuild confidence. Continued margin pressure, however, may keep earnings expectations restrained.
At 12:20 pm, the market’s assessment remained firmly negative, with Bandhan Bank shares down 16.92% at ₹173.50 despite the lender’s improved quarterly profit.
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(This report is for informational purposes only and does not constitute investment advice)
