Bandhan Bank's Q3 net profit down 13.5% on higher Covid provisioning

The lender has made provisioning to the tune of Rs 1,068 crore in Q3FY21, of which Rs 1,000 crore is covid-related

Kolkata-based private sector lender Bandhan Bank’s net profit dropped 13.5 per cent to Rs 632.6 crore for the quarter ended December(Q3), compared to Rs 731 crore in the corresponding period a year ago due to rise in covid provisions. Sequentially, net profit declined by 31 per cent.

Net interest income (NII) of the lender grew at a robust pace of 34.5 per cent year-on-year to Rs 2,071.7 crore in Q3FY21, compared to Rs 1,540 crore. The non-interest income saw a 55 per cent growth to Rs 553 crore, taking the total income of the lender to Rs 2,625 crore in Q3FY21, up 38.3 per cent. Net interest margin of the lender was up 4 basis points year-on-year to 8.3 per cent.

The lender has provisioned Rs 1,068.7 crore in Q3FY21, of which Rs 1,000 crore is Covid-related. With this provision and additional standard assets provision that the bank is carrying in micro banking portfolio stands at Rs 3,119 crore.

While reported gross non-performing assets (NPAs) of the bank stand at 1.1 per cent in Q3FY21 and net NPAs at 0.3 per cent, the pro-forma gross NPAs of the bank, if not for the Supreme Court’s standstill agreement on asset classification, would have been 7.12 per cent and net NPAs would have been 2.36 per cent.

The bank’s shares fell more than 5 per cent to Rs 341.05 on the BSE post the result announcement.

“Since bulk of our lending exposure is in microfinance, what we have seen, particularly after covid, there are lot of customers who are making part installments. So, there is a timing difference in regularising these customers. In the interim, because of part payments, the bucketing moves, but that does not mean this is a loss given the default situation. It’s a timing difference, they make take three months more but they will come back and regularise”, said Sunil Samdani Chief Financial Officer, Bandhan Bank.

While the collection efficiency in the September quarter for the lender was at 89 per cent, it improved to 90 per cent in the December quarter but it has fallen to 90 per cent in January, the bank management said. In Assam, the collection efficiency has fallen to 78 per cent and in West Bengal it has fallen to 89 per cent in the current month.

In Assam, the state government has passed a new legislation which aims to restrict the way firms lend and recover loans. As for borrowers, the cumulative loan outstanding has been capped at Rs 1.25 lakh — in line with the RBI’s guidelines — though not more than two lenders can lend to the same borrower, against three permitted by the RBI.

“The initial impact is the biggest and we have seen that impact then things stabilise and keep improving”, said Samdani.

The microcredit group loan in Assam is to the tune of Rs 6,917 crore, which is 8 per cent of the total advances of the bank. “Now, we are very conservative when it comes to fresh lending”, said Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank.

Advances of the lender, including off book and TLTRO, grew 22.6 per cent to Rs 80,255.2 crore in Q3FY21 and sequentially it grew almost 5 per cent.

“New to credit customer customers has improved in December 2020 more than in December, which means credit demand is coming back”, Ghosh said.

Total deposits of the bank increased by 29.6 per cent to Rs 71,188.3 crore as on December 31, 2020 and sequentially it has gone up by 7.7 per cent.