Bandhan Bank Ltd. experienced a sharp 14.3% decline in its share price on Wednesday, hitting a low of Rs 178.75 apiece on the BSE. This significant drop followed the bank's June quarter (Q1) results, which revealed a substantial miss on net profit, primarily attributed to higher staff costs and increased provisions.
Adding to investor concerns, the bank's management lowered its exit return on assets (RoA) guidance for FY27 to 1.2-1.4% from the earlier 1.6-1.8%. This revision was driven by anticipated lower margins and elevated operating expenses. Furthermore, the management cited external factors such as a volatile geopolitical environment, below-normal monsoon rainfall, and tighter liquidity conditions as potential contributors to increased cost of funds and higher technology expenses in the near term.
Brokerage Views on Bandhan Bank Stock
Following the Q1 results, several brokerages updated their views on Bandhan Bank shares:
- Macquarie maintained the lowest target price at Rs 130.
- Anand Rathi and Ambit Capital reiterated 'Sell' ratings, with targets of Rs 146 and Rs 150 respectively.
- JPMorgan and UBS kept 'Neutral' ratings, setting targets at Rs 175 and Rs 200 respectively.
- CLSA recommended 'Accumulate' with a target of Rs 235.
- Jefferies reiterated its 'Buy' rating and raised its target price to Rs 240 from Rs 215.
- Nuvama downgraded the stock from 'Buy' to 'Hold', revising its target to Rs 230 from Rs 250, citing expectations of a more gradual RoA trajectory due to higher funding costs.
- MOFSL downgraded the stock to 'Neutral', retaining a target of Rs 225, after cutting its FY27 and FY28 earnings estimates.
- JM Financial cut its earnings estimates for FY27 and FY28 but raised its target to Rs 220 from Rs 200.
- Ashika Stock Broking assigned the highest target price of Rs 260 on the stock.
While some brokerages acknowledged healthy advances growth and stable asset quality, the revised RoA guidance and external uncertainties are expected to weigh on the bank's profitability. The trend of the southwest monsoon remains a key factor to monitor for the bank's future performance.