Bandhan Bank at Rs 220? No risk of kitchen sinking, says CLSA 2025 best

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CLSA

Bandhan Bank’s shares have recently surged following an upgrade by CLSA, a prominent brokerage firm. On February 21, 2025, CLSA raised its rating for Bandhan Bank to ‘High Conviction Outperform’ from the previous ‘Outperform’ and maintained a target price of ₹220, indicating a potential upside of approximately 61% from the current levels. citeturn0search2

CLSA Key Factors Behind CLSA’s Upgrade:

1. New Management Team: CLSA highlights that Bandhan Bank has undergone significant leadership changes, with nearly all key management members joining within the last two years. The new Managing Director and CEO, Partha Pratim Sengupta, assumed his role in November 2024. This fresh leadership is expected to focus on enhancing technology and refining underwriting processes, reducing concerns about potential legacy issues. citeturn0search2
2. Improved Asset Quality: The bank’s asset quality has shown improvement, with the gross non-performing assets (NPA) ratio declining to 4.7% in Q3FY25 from 7% in the same quarter the previous year. This reduction in NPAs is a positive indicator of the bank’s financial health. citeturn0search3
3. Strategic Shift Toward Secured Lending: CLSA notes that Bandhan Bank plans to increase the proportion of secured loans from around 50% to 55-60% over the next two years. This strategic shift is expected to reduce business cyclicality and better align with regulatory expectations, potentially leading to a more stable financial performance. citeturn0search2
4. Outperformance in the Microfinance Sector: Despite challenges in the microfinance sector, Bandhan Bank has demonstrated resilience. CLSA observes that the bank’s microfinance slippage ratio of 8% in Q3FY24 was notably better than that of its peers. Additionally, less than 1% of Bandhan Bank’s microfinance book is tied to Karnataka, a region facing specific concerns. citeturn0search2

Implications for Investors:

CLSA’s positive outlook on Bandhan Bank suggests that the bank is well-positioned to capitalize on the anticipated recovery in the microfinance sector. The strategic focus on secured lending and the strengthening of the management team are expected to contribute to improved financial stability and growth. Investors may view the current share price as an attractive entry point, Bandhan Bank’s shares have recently surged following an upgrade by CLSA, a prominent brokerage firm. On February 21, 2025, CLSA raised its rating for Bandhan Bank to ‘High Conviction Outperform’ from the previous ‘Outperform’ and maintained a target price of ₹220, indicating a potential upside of approximately 61% from the current levels.

business-standard.com

Key Factors Behind CLSA’s Upgrade:

1. New Management Team: CLSA highlights that Bandhan Bank has undergone significant leadership changes, with nearly all key management members joining within the last two years. The new Managing Director and CEO, Partha Pratim Sengupta, assumed his role in November 2024. This fresh leadership is expected to focus on enhancing technology and refining underwriting processes, reducing concerns about potential legacy issues. business-standard.com
2. Improved Asset Quality: The bank’s asset quality has shown improvement, with the gross non-performing assets (NPA) ratio declining to 4.7% in Q3FY25 from 7% in the same quarter the previous year. This reduction in NPAs is a positive indicator of the bank’s financial health. moneycontrol.com
3. Strategic Shift Toward Secured Lending: CLSA notes that Bandhan Bank plans to increase the proportion of secured loans from around 50% to 55-60% over the next two years. This strategic shift is expected to reduce business cyclicality and better align with regulatory expectations, potentially leading to a more stable financial performance. business-standard.com
4. Outperformance in the Microfinance Sector: Despite challenges in the microfinance sector, Bandhan Bank has demonstrated resilience. CLSA observes that the bank’s microfinance slippage ratio of 8% in Q3FY24 was notably better than that of its peers. Additionally, less than 1% of Bandhan Bank’s microfinance book is tied to Karnataka, a region facing specific concerns. business-standard.com

Implications for Investors:

CLSA’s positive outlook on Bandhan Bank suggests that the bank is well-positioned to capitalize on the anticipated recovery in the microfinance sector. The strategic focus on secured lending and the strengthening of the management team are expected to contribute to improved financial stability and growth. Investors may view the current share price as an attractive entry point, given the potential for significant appreciation.given the potential for significant appreciation.

Conclusion:

CLSA’s upgrade of Bandhan Bank reflects confidence in the bank’s strategic direction and management. The combination of a revitalized leadership team, improved asset quality, and a strategic shift toward secured lending positions Bandhan Bank for potential growth in the coming quarters. Investors should monitor the bank’s performance and the broader microfinance sector dynamics to assess the realization of these positive projections.

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