CLSA Downgrades Bandhan Bank, Cuts Target Price by 13.6%

On Friday, October 31, 2025, a significant downgrade by brokerage firm CLSA impacted Bandhan Bank's stock. CLSA reduced its rating on Bandhan Bank from 'buy' to 'accumulate' and slashed its price target by 13.6%, from ₹220 to ₹190 per share. This move comes as CLSA noted weaknesses in the bank's performance, including weak net interest income (NII) and pre-provision operating profit (PPOP), alongside elevated credit costs. The bank's microfinance institution (MFI) book continues to shrink, albeit at a slower pace. Furthermore, Bandhan Bank's net interest margin (NIM) declined by 60 basis points due to interest yield cuts and the pass-through of repo rate changes. Despite these concerns, CLSA anticipates that the NIM has likely bottomed out and is expected to recover in the financial year 2027. The downgrade led to a nearly 4% drop in Bandhan Bank's shares in early trading.

Impact This downgrade highlights the sensitivity of bank stocks to analyst ratings and financial performance metrics. Investors reacted negatively, leading to a share price decline, and will now closely monitor the bank's ability to improve its net interest income, manage credit costs, and achieve NIM recovery as projected. Impact Rating: 7/10

Difficult Terms Net Interest Income (NII): The difference between interest income generated by a bank from its lending activities and the interest it pays out to its depositors and other funding sources. Pre-Provision Operating Profit (PPOP): A measure of a bank's profitability from its core operations before accounting for loan loss provisions and taxes. Credit Costs: Expenses incurred by a bank due to loan defaults or expected defaults, often expressed as a percentage of total loans. MFI Book: The portfolio of loans provided by the bank to microfinance institutions, which in turn lend to individuals or small businesses. Net Interest Margin (NIM): The difference between interest revenues and interest expenses of a financial intermediary, expressed as a percentage of interest-earning assets. Basis Points: A unit of measure equal to one-hundredth of one percent (0.01%). For example, 60 basis points is equal to 0.60%. Repo Rate: The interest rate at which the central bank of a country (like the Reserve Bank of India) lends money to commercial banks, typically for short durations.