Bandhan Bank Reports Strong Q4 FY26 Results

Key Financials and Operations

Bandhan Bank's fourth quarter of fiscal year 2026 showed significant financial strength. Net profit after tax rose 68% year-over-year to ₹534 crore, driven by a 13% increase in gross advances to ₹1.54 lakh crore. The bank's Net Interest Margin (NIM) saw a healthy sequential improvement, reaching 6.2% compared to 5.9% in the previous quarter. On the liabilities side, total deposits stood at ₹1.66 lakh crore, with a CASA ratio of 29.3%. The bank also reported a strategic reduction in bulk deposits, down 7% year-over-year, to foster greater granularity in its funding. Asset quality metrics remained stable, showing Gross NPAs at 3.3% and Net NPAs at 1.0%.

Strategic Shift Towards Secured Lending

The bank's strategic pivot towards a more secured lending book is showing tangible results. The secured loan portfolio has grown 25% year-over-year, now constituting 56% of total advances, a significant increase from previous periods. This diversification aims to reduce the bank's historical reliance on micro-credit.

Background: From Microfinance to Diversification

Bandhan Bank, which started its journey as a microfinance institution, has been on a deliberate path to de-risk its loan portfolio over the past few years. This strategy involves consciously growing its housing finance, vehicle finance, and MSME loan segments. The goal is to balance its loan book, enhance asset quality stability, and tap into new customer segments beyond its core micro-credit base.

Outlook and Guidance

Shareholders can expect a continued focus on growing the secured lending book, with a target of 58% of total advances by FY27. The bank aims for improved profitability, targeting a Return on Assets (ROA) of 1.6% to 1.7% by the end of FY27. Guidance for credit growth is set at a healthy 14% to 15% for the upcoming fiscal year. Further NIM expansion of 10-20 basis points is projected in the next 2-3 quarters. The dividend recommendation of INR 1.50 per share signals confidence in current performance.

Potential Challenges Ahead

Operating expenses rose 10% sequentially, partly due to non-recurring items like PSLC and IT expenses, which the bank expects to normalize. A significant future challenge is the potential impact of Expected Credit Loss (ECL) regulations, estimated at ₹1,250 crore, though it will be phased over 5 years. Macroeconomic uncertainties, including the Middle East conflict, were also flagged as potential risks to fuel prices and the broader economy.

Peer Strategy Comparison

Bandhan Bank's focus on increasing its secured loan book and retail deposits aligns with strategies seen in peers like AU Small Finance Bank and Equitas Small Finance Bank. These banks are also actively diversifying their loan portfolios and strengthening their liability franchises to build resilience and sustainable growth.

Key Figures

• Secured loan book growth: 25% YoY.
• Bulk deposits reduced: 7% YoY.
• Estimated ECL impact: ₹1,250 crore.

What to Watch Next

• Management's ability to achieve its credit growth target of 14-15% for FY27.
• Progress on the secured vs. unsecured loan mix, aiming for 58% secured by FY27.
• The actual impact of ECL provisioning as it gets implemented and its effect on profitability.
• Sustained improvement in operating expense management.
• Deposit growth trajectory amidst a competitive landscape.