Bandhan Bank: Axis Securities Retains Buy Rating After Q2 Beat

Net Profit jumped 455.8% YoY to Rs 622 Cr; Net NPA declined 45 bps to 0.92%.

Reader Takeaway: Strong asset quality recovery in the EEB portfolio drives optimism, though cost of funds remains a hurdle.

What just happened

Axis Securities has released a brokerage report maintaining a 'BUY' rating on Bandhan Bank with a target price of Rs 190. The bank delivered a strong Q2FY27 result, surpassing analyst estimates for both Pre-Provision Operating Profit (PPOP) and Profit After Tax (PAT).

Why this matters

The bank is signaling a recovery from recent stress, particularly within its Emerging Entrepreneur Business (EEB) franchise. Delinquencies in this segment fell to 2.9% from 3.5% in the previous quarter, indicating successful risk management and stabilization of the asset book.

The backstory

Bandhan Bank has spent recent quarters navigating asset quality challenges. The current shift toward a more diversified loan portfolio—targeting an equal split between EEB, Wholesale, and Housing/Retail segments—is intended to reduce concentration risk and stabilize future earnings.

What changes now

Management has committed to 14% credit growth for FY27. While NIMs faced a slight sequential contraction of 10 bps to 6.1% due to portfolio shifts, the bank has guided for a stable 6.1-6.2% range for the full year, relying on repo rate tailwinds.

Risks to watch

Investors should monitor the potential for any unexpected stress within the EEB loan book. Furthermore, a general slowdown in credit momentum or rising cost of funds could pressure the bank’s goal of achieving a 1.6-1.8% return on assets (RoA) over the medium term.

What to track next

The bank’s progress in mobilizing granular retail deposits and improving CASA (Current Account Savings Account) ratios will be critical to sustaining margins and supporting long-term profitability.