1. At a Glance
Bandhan Bank’s transformation from a microfinance pioneer to a full-service commercial bank has had more twists than a Bengali thriller. Q1 FY26 shows green shoots in profit, but a closer look reveals margin volatility, NPA creep, and an identity crisis between high-yield and low-risk lending.
2. Introduction with Hook
Imagine giving a Ferrari to someone who learned to drive in a Maruti 800. That’s Bandhan Bank’s journey—from hyper-growth in microfinance to navigating the full-scale complexities of universal banking. And Q1 FY26? Let’s just say it stalled a bit on the highway.
- Q1 FY26 Net Profit: ₹372 Cr (up 17% QoQ, but -58% YoY from Q1 FY25 high of ₹936 Cr)
- Gross NPA: 4.96% (flat but still elevated)
- Stock Performance (3Y): -13% CAGR
3. Business Model (WTF Do They Even Do?)
- Originated as an NBFC-MFI (Microfinance Institution) in 2006
- Became a Scheduled Commercial Bank in 2015
- Present across 34 states with 6,200+ outlets
- Focus areas:
- Microfinance (Group Lending)
- Retail Loans, Housing, SME Finance
- High CASA deposits in East India
They still carry their MFI DNA—but with a bloated deposit base, regulatory expectations, and margin pressures.
4. Financials Overview
| Metric | FY23 | FY24 | FY25 | TTM |
|---|---|---|---|---|
| Revenue (₹ Cr) | 15,905 | 18,870 | 21,948 | 21,888 |
| Net Profit (₹ Cr) | 2,195 | 2,230 | 2,745 | 2,054 |
| EPS (₹) | 13.62 | 13.84 | 17.04 | 12.75 |
| Net Interest Margin | 6.7% | 6.3% | ~6.1% | ~6.0% |
| ROE | 12% | 11% | 12% | 12% |
Steady revenue growth but earnings volatile, especially post-COVID. FY25 earnings boosted by other income and write-backs.
5. Valuation
| Metric | Value |
|---|---|
| CMP | ₹187 |
| Book Value | ₹151 |
| P/B Ratio | 1.24x |
| P/E Ratio | 14.7x |
Fair Value Range:
- Peer Median P/B: 1.35–1.5x → ₹204–₹227
- Earnings-based PE: 13–15x TTM EPS ₹12.75 → ₹166–₹191
- EduInvesting FV Range: ₹175 – ₹210
Currently trading near lower band—cheap, but justified?
6. What’s Cooking – News, Triggers, Drama
- Q1 FY26 PAT at ₹372 Cr, gross NPAs at 4.96% (vs 4.71% in Q4)
- Advance growth muted at 6% YoY
- Deposits up 16% YoY—liability side strong
- FII holding dropped significantly from 34% to 24% over 2 years
- Contingent Liabilities: ₹9,214 Cr—red flag?
- NPA provisioning improving but still weighing margins
7. Balance Sheet
| Particulars (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Equity Capital | 1,611 | 1,611 | 1,611 |
| Reserves | 17,973 | 19,999 | 22,748 |
| Deposits | 108,065 | 135,202 | 151,212 |
| Borrowings | 24,711 | 16,372 | 11,138 |
| Total Liabilities | 156,037 | 177,842 | 191,476 |
Strength on deposit franchise, decline in borrowings. Strong liability engine, but lending fuel needs tuning.
8. Cash Flow – Sab Number Game Hai
| Year | CFO (₹ Cr) | CFI (₹ Cr) | CFF (₹ Cr) | Net Flow |
|---|---|---|---|---|
| FY23 | -4,245 | -1,618 | 4,791 | -1,071 |
| FY24 | 14,808 | 1,691 | -8,579 | 7,921 |
| FY25 | 2,752 | -3,879 | -5,475 | -6,601 |
Volatile cash flows, highly dependent on provisioning and treasury gains. FY24 was an outlier.
9. Ratios – Sexy or Stressy?
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| ROE % | 12% | 11% | 12% |
| NIM % | ~6.5% | ~6.3% | ~6.1% |
| Gross NPA % | 4.9% | 4.7% | 5.0% |
| Net NPA % | 1.2% | 1.28% | 1.36% |
| Cost to Income % | ~55% | ~53% | ~56% |
NPA cleanup has improved, but relapse is happening. Efficiency ratios flat. ROE stuck below peers.
10. P&L Breakdown – Show Me the Money
| Quarter | Revenue (₹ Cr) | Net Profit (₹ Cr) | EPS (₹) | Gross NPA % | Net NPA % |
|---|---|---|---|---|---|
| Q1 FY25 | 5,536 | 1,063 | 6.60 | 4.23% | 1.15% |
| Q2 FY25 | 5,500 | 937 | 5.82 | 4.68% | 1.29% |
| Q3 FY25 | 5,479 | 426 | 2.65 | 4.68% | 1.28% |
| Q4 FY25 | 5,434 | 318 | 1.97 | 4.71% | 1.28% |
| Q1 FY26 | 5,476 | 372 | 2.31 | 4.96% | 1.36% |
Trend Check: Topline stable. Bottom-line whipsawing. Asset quality slowly declining. Growth meh.
11. Peer Comparison
| Bank | CMP ₹ | P/E | ROE % | GNPA % | PAT (₹ Cr) | Book Value ₹ | P/B |
|---|---|---|---|---|---|---|---|
| HDFC Bank | 1,957 | 21x | 14.4% | 1.3% | 16,258 | 682 | 2.87x |
| ICICI Bank | 1,426 | 19x | 18.0% | 2.3% | 13,557 | 438 | 3.26x |
| Axis Bank | 1,099 | 12x | 16.3% | 2.0% | 6,244 | 603 | 1.82x |
| Bandhan Bank | 187 | 14.7x | 12.0% | 5.0% | 2,054 | 151 | 1.24x |
Conclusion: Trading cheap, but not unjustifiably. Higher NPA = lower multiples. Market knows.
12. Miscellaneous – Shareholding, Promoters
| Shareholder | Sep 22 | Sep 23 | Jun 25 |
|---|---|---|---|
| Promoters | 39.99% | 39.98% | 40.92% |
| FIIs | 34.20% | 32.78% | 24.34% |
| DIIs | 12.50% | 17.45% | 16.52% |
| Public | 13.25% | 9.73% | 18.15% |
Trends:
- FIIs exiting.
- Retail bouncing back.
- Promoter holding stable—may indicate confidence, or lack of options.
13. EduInvesting Verdict™
Bandhan Bank is in its awkward teenage phase—no longer a high-growth MFI, not yet a mature universal bank. It has the deposits, it has the distribution, but it lacks direction. Margins are thinning, GNPA is climbing, and profit growth is moody at best.
If you’re betting on a turnaround, keep your stop-loss tight and your patience tighter.
Metadata
– Written by EduInvesting Research | 20 July 2025
– Tags: Bandhan Bank, Microfinance, Q1FY26, Private Sector Bank, Banking Stocks, Turnaround Play, NPAs
