Bandhan Bank reported a profit of ₹620 crore for the second quarter, beating analyst estimates. While earnings forecasts for the coming years were increased, the bank faces challenges from stagnant growth in its core micro-loan segment and a decline in low-cost savings deposits.
Bandhan Bank posted a profit of ₹620 crore for the second quarter of the 2027 fiscal year, marking a 24% increase compared to the previous quarter. This performance was 14% higher than what market analysts had expected, supported by a recovery in loan disbursals and improved other income streams. The bank’s Net Interest Income, which is the difference between interest earned from loans and interest paid on deposits, grew by 14% year-on-year to reach ₹2,960 crore.
Despite the rise in profit, the bank’s operating margins are facing pressure. Net Interest Margins, a key measure of profitability for banks, narrowed by 9 basis points from the previous quarter to 6.1%. This contraction is in line with management's earlier expectations as the bank deals with changing interest rate dynamics.
Investors are closely watching the bank's loan portfolio, which reveals two different growth stories. While the overall net advances grew by 15% year-on-year, this was largely driven by a 20% growth in the non-Emerging Entrepreneur Business (EEB) segment. In contrast, the bank's core business of lending to small entrepreneurs—the EEB segment—remained stagnant. This lack of growth in the core business is a factor that market watchers will monitor closely in the coming quarters.
Another area requiring attention is the deposit mix. While total deposits grew by 9% year-on-year, the Current Account Savings Account (CASA) ratio, which represents low-cost funds, dropped by 270 basis points to 26.7%. A lower CASA ratio means the bank may have to rely more on expensive deposits, which can impact profitability.
Following these results, analysts at Motilal Oswal revised their earnings estimates for the 2027 and 2028 fiscal years upward by 10% and 2%, respectively. However, they maintained a Neutral stance on the stock. The brokerage set a target price of ₹175, based on the bank's expected adjusted book value for March 2028. The bank's credit-to-deposit ratio has moderated to 90%, suggesting the bank is balancing its lending activity with available deposits. Investors may continue to track whether the bank can revive growth in its core micro-loan business and improve the stability of its savings deposits in the upcoming periods.