The share price of Bandhan Bank gained over 4 percent on Tuesday after CLSA raised the target price on the stock and retained its 'Buy' rating.
The stock price jumped as much as 4.70 percent to an intraday high of Rs 315.00 on the BSE. At 11:35 am, the shares were trading 3.44 percent higher at Rs 311.20 apiece as against 1.31 percent gains in the benchmark Sensex.
Bandhan Bank reported a net profit of Rs 920 crore in the second quarter of fiscal 2021, beating CNBC-TV18 analysts’ poll estimates of Rs 779.2 crore. Net profit increased by 67.3 percent against the previous quarter.
The bank's net interest income (NII) rose by 25.8 percent to Rs 1,923.1 crore from Rs 1,529.1 crore, YoY. Net interest margin was at 8 percent as against 8.2 percent, YoY.
Read here: Bandhan Bank Q2 net profit falls 5% to Rs 920 crore; NII jumps 26% YoY; Asset quality improves
CLSA reiterated a 'Buy' rating with its target price raised to Rs 430 from Rs 400, valuing the bank at 2.9x Sep-22CL ABV.
CLSA is of the view that these premium valuations are justified due to its high RoA profile and growth.
“Bandhan Bank reported a strong set of numbers with improved asset quality trends, greater collection efficiency of Micro banking book in October, and the cumulative Covid-19 provision guidance being maintained at 3.5%. Strong liabilities momentum continued with CASA at 38.2% (up 110bps QoQ), retail deposits at 77% of overall deposits, and cost of funds reporting a 20bp improvement sequentially,” CLSA said.
Bandhan Bank’s asset quality during the quarter ended September 2020 improved as gross non-performing assets (NPA) declined 13.2 percent to Rs 874 crore from Rs 1,007 crore and net NPA fell 21.9 percent to Rs 262.5 crore from Rs 336 crore, QoQ.
Gross NPA as a percentage of gross advances decreased by 20 bps to 1.2 percent from 1.4 percent while net NPA as a percentage of net advances fell by 10 bps to 0.4 percent from 0.5 percent, sequentially.
“The bank has articulated its next 5-year growth strategy, which reinforces our view that Bandhan will continue to gain market share in the Indian banking system,” CLSA added.