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.

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Deteriorating asset quality, pressure from MFI book weigh on performance Brokerages remain optimistic despite weak earnings; upside seen up to 18%

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.”