Bandhan Bank Q1 Net Plunges 65%, Shares Fall 4%; Brokerages Stay Bullish

Shares of Bandhan Bank slumped over 4% in early trade on July 21, breaking a four-day winning streak, after the lender reported a 65% year-on-year decline in Q1 FY26 net profit. The stock opened weak at ₹179 and dragged sentiment among select private lenders despite broader index stability.

• Net profit for Q1 stood at ₹372 crore, down sharply from ₹1,063 crore in Q1 FY25

• Net interest income (NII) declined 8% YoY to ₹2,757 crore

• Operating profit contracted 14% YoY to ₹1,668 crore

• Provisions surged to ₹1,147 crore, more than double the ₹523 crore in the year-ago period

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Deteriorating asset quality, pressure from MFI book weigh on performance

The microfinance-heavy lender reported a concerning trend in asset quality. Net non-performing assets rose to ₹1,744 crore, while the Net NPA ratio increased to 1.36%, with the management attributing the spike to elevated slippages in the eastern India microfinance portfolio.

The net interest margin (NIM) remained stable at 6.4%, but operating leverage weakened due to rising credit costs and muted loan growth. The bank confirmed that it is in a consolidation phase, focusing on tighter underwriting and strengthening collections.

• Gross slippages remained elevated, particularly in eastern states

• Collections and credit discipline remain top focus areas, management said

• June rate cut expected to reflect more in H2 FY26 earnings

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Brokerages remain optimistic despite weak earnings; upside seen up to 18%

Despite the Q1 earnings slump, leading brokerages maintained a bullish outlook on Bandhan Bank, citing attractive valuations, improving credit trends, and expectations of recovery in the MFI cycle.

• Jefferies retained a ‘Buy’ call with a target price of ₹215, implying 15% upside. It cut FY26 earnings estimate by 6% but noted that NII and credit cost trends were better sequentially.

• Macquarie reiterated an ‘Outperform’ rating with a ₹210 target. While Q1 profit missed estimates due to high provisions, it expects NIM pressure to persist in the near term.

• CLSA maintained ‘High Conviction Outperform’, setting a target of ₹220, highlighting expectations of credit cost improvement in H2 FY26. It also flagged a moderation in CASA ratio by 400 bps.

CLSA revised FY26–FY28 estimates downward by up to 36%, citing lower-than-expected pre-provision operating profit (PPOP) and slower fee income growth.

CEO confident on long-term strategy; stock up 15% YTD

Commenting on the performance, CEO Partha Pratim Sengupta stated, “Despite a challenging environment, our strong deposit growth and retail momentum underscore the resilience of our strategy. We remain committed to operational efficiency and prudent risk management.”

• Stock has risen 15% in 2025 YTD, despite today’s drop

• Up 22% in last six months, but down over 7% in the past year

• Market cap stands at ₹29,380 crore, with a P/E ratio of 14.67

Highlights:

• Q1 net profit plunges 65% YoY to ₹372 crore

• Asset quality deteriorates; Net NPA ratio at 1.36%

• Provisioning more than doubles amid stress in MFI book

• Brokerages maintain bullish stance with targets up to ₹220

• CEO underscores retail growth, long-term focus on risk controls