Shares of Bandhan Bank surged by 2.5% on October 7 after the lender released its Q2 business update, showcasing significant growth. At the market opening, the stock was trading at ₹191 on the NSE. The bank's solid performance in the July-September quarter has drawn attention from investors in the share market investment space, particularly with its consistent loan and deposit growth. Furthermore, the board extended the interim MD and CEO Ratan Kumar Kesh's tenure by an additional month, adding stability to leadership during this period.
Strong loan and deposit growth
Bandhan Bank's loans and advances recorded an impressive 21.4% year-on-year increase, reaching ₹1.31 lakh crore for Q2, compared to ₹1.07 lakh crore in the corresponding quarter of the previous fiscal year. In terms of deposits, the bank witnessed a notable 27.2% rise, amounting to ₹1.42 lakh crore, up from ₹1.12 lakh crore. This growth in loans and deposits highlights the lender's consistent performance and has solidified its position in the share market investment landscape.
Brokerages' positive outlook
Brokerages such as Jefferies and Nomura have acknowledged Bandhan Bank's strong Q2 results, particularly focusing on its deposit growth. Jefferies attributed much of this success to a 58% surge in bulk deposits, which reached ₹45,908 crore. This robust growth further strengthens investor confidence in share market investment as Bandhan Bank continues to expand its deposit base. Retail deposits, including the Current Account Savings Account (CASA), also rose by 16.4% year-on-year to ₹96,603 crore, though the CASA ratio slipped from 38.5% to 33.2% over the same period.
Challenges ahead: loan-to-deposit ratio decline
Despite the positive numbers, Bandhan Bank experienced a drop in its loan-to-deposit ratio by 260 basis points quarter-on-quarter, ending Q2 at 91.7%. Jefferies noted that this decline may act as a short-term drag on the bank's loan growth, impacting its future performance. However, with continued strong deposit growth, Bandhan Bank remains a key player in the share market investment arena, even as the loan-to-deposit ratio requires attention in the upcoming quarters.
Future catalysts: new CEO and recovery prospects
Jefferies maintains a 'buy' rating for Bandhan Bank, with a target price of ₹240, believing that the upcoming CEO appointment and clarity around the recovery of the Credit Guarantee Fund for Micro Units (CGFMU) could serve as catalysts for future stock price appreciation. These developments could significantly impact the bank's positioning in share market investment, driving further growth in its stock price.
Nomura's outlook
Nomura also highlighted the bank's impressive Q2 performance but maintained a more cautious stance, assigning a 'reduce' rating with a target price of ₹170. The brokerage cited concerns around the lender's asset quality and the impending leadership change as key factors that could influence the stock's performance. Investors in share market investment are keeping a close eye on these factors as they could dictate the direction of Bandhan Bank's stock in the near future.
Bandhan Bank in the share market investment landscape
As Bandhan Bank continues to demonstrate strong growth in its loans and deposits, it remains an attractive option for those looking to invest in stocks. While challenges like the decline in the loan-to-deposit ratio and the CEO transition exist, the bank's solid fundamentals keep it in a strong position within the share market investment ecosystem. With upcoming developments and positive brokerage outlooks, Bandhan Bank could offer significant opportunities for investors looking for long-term gains in the stock market.
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