Bandhan Bank’s asset quality issues play spoilsport in Q1FY24

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₹98,197 crore. On a sequential basis, loan growth declined by 6.3%. The relatively slower loan growth is mainly on account of seasonal dip, particularly in the MFI segment.

Analysts expect the bank’s loan growth to pick-up in coming quarters with the upcoming festival season. Meanwhile, reacting to Q1 results, Bandhan Bank stock fell 2.6% on Monday. Its performance has been dismal in recent past.

In 2023 so far, the stock has declined by around 11%, underperforming Nifty Bank’s 5.7% returns. The lag in returns can be attributed to lingering concerns on sustainability of asset quality improvement. To be sure, the bank had been building a strong liability franchise.

Also, since MFI is seen as a relatively risky portfolio, the bank is div-ersifying into housing finance and retail loan segments. But these factors may not be enough to turnaround the stock’s perfo-rmance as operating efficiencies would take some quarters to playout. “The stock’s re-rating prospects depend on consistent improvement in asset quality metrics and loan growth which could lead to a sustainable return on asset of over 2.5% and return on equity of over 20% in FY24," Yuvraj Choudhary, analyst, Anand Rathi Institutional Equities, said.Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!