Shares of Bandhan Bank, which hit a new high of Rs 585, up 5% on Tuesday, was trading at its highest level since listing on March 27, 2018. The stock gained 54% over the issue price of Rs 375. Since April 26, post FY18 results, Bandhan Bank has outperformed the market by surging 16% after the private sector lender reported 21% year on year (YoY) growth in net profit at Rs 13.46 billion. Net interest income grew 26% at Rs 30.32 billion over the previous fiscal. Bandhan Bank is a unique business model of high yielding micro finance loan portfolio (94% priority sector fulfilment) and low cost deposit franchise with 34.3% CASA offered in the ambit of a commercial bank, according to analysts ICICI Securities.
“Net interest margin (NIM) was at 9.8% for FY18. With low cost funds, we expect NIM to sustain at around 9% even as the bank starts building non-micro loans. Along with higher NIM, low operating cost at around 35% C/I ratio remains its key differentiator, high RoA driver. Its opex to AUM ratio was at 4% for FY18. We expect high RoA of 3.5-4%, RoE >20% to sustain. With almost double NIM, RoA vs. HDFC Bank & lower cost to income (C/I) ratio, with no legacy corporate portfolio pains, we believe Bandhan Bank will command higher premium to HDFC Bank,” the brokerage firm said in recent report. The brokerage firm had initiate coverage with a BUY recommendation with 12 month target price of Rs 600 per share.
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