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CLSA gives 'outperform' rating for Bandhan Bank; sets target price at Rs 390

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CLSA gives 'outperform' rating for Bandhan Bank; sets target price at Rs 390

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Brokerage firm CLSA has given an 'outperform' rating for Bandhan Bank, stating that there is no mention of microfinance loan waivers in the Assam and West Bengal election manifestos. CLSA has set a price target of Rs 390 for the stock.

CLSA gives 'outperform' rating for Bandhan Bank; sets target price at Rs 390
Brokerage firm CLSA has given an 'outperform' rating for Bandhan Bank, stating that there is no mention of microfinance loan waivers in the Assam and West Bengal election manifestos. CLSA has set a price target of Rs 390 for the stock.
The brokerage firm states that in the upcoming elections of Assam and West Bengal election manifestos largely refrained from promising microfinance loan waivers. In Assam, the manifesto refers only to enhancing income support to Rs 3,000 per month to a larger set of beneficiaries.
As highlighted by credit bureaus, Assam's overdue loans at more than 40 percent were higher than average due to political uncertainty, which should abate now. But the West Bengal overdue at about 40 percent on a system-level has been surprisingly high despite reduced political noise; so, it will be required to monitor if the absence of manifesto waiver announcements will lead to improved microfinance collections in Bengal.
The report also mentions, “In Assam, the largest opposition party has proposed farm/loan waivers. The key positive in the BJP manifesto is an enhanced direct-cash payment program with a higher payout from Rs 830 per month to Rs 3,000 per month and covering 30 lakh women versus 17 lakh earlier.”
The note adds that in West Bengal, both parties plan to allocate funds to support new and existing self-help groups. The political noise in West Bengal has been lower than Assam.
As of December 2020, Bandhan Bank had reported 7 percent proforma gross non-performing assets and 14 percent of loans in Par 30-90. Collections lagged in January 2021 month-on-month due to political interference in Assam and, if sustained, could have led to a large rise in non-performing assets. The clarity the manifesto provides should help reduce uncertainty, stated the CLSA note.
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