Revenue
Margin
Demand
Guidance
Tone
Metrics cut 2
- FY27 exit ROA guidance lowered to 1.2%-1.4% (from 1.6%-1.8%)
- NIM outlook cut to hold ~6.2% (from earlier line of sight to 6.5% by Q4FY27)
Event Participants
Executives
8 Hirak Joshi, Partha Pratim Sengupta, Rajeev Mantri, Rajinder Kumar Babbar, Ratan Kumar Kesh, Satish Kumar, Surajit Roy Choudhury, Vikash Mundhra
Analysts
9 Anand Dama (Nuvama Asset Management), Ankit Bihani (Nomura), Digant Haria (Greenedge Wealth), Jai Mundhra (ICICI Securities), MB Mahesh (Kotak Securities), Nitin Aggarwal (Motilal Oswal Financial Services), Piran Engineer (CLSA), Rahul Kumar (Vaikarya Investment Management), Sameer Bhise (Dymon Asia)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Deposits | ₹1.65 lakh crores | +7% YoY; bulk deposits deliberately cut 13% YoY (share down to 26% from 32%); retail deposits +16% YoY, now 74% of total |
| CASA | ₹48,479 crores | +16% YoY, broad-based across savings and current accounts; CASA ratio improved sequentially to 29.4% |
| Gross Advances | ₹1.56 lakh crores | +16% YoY, +1% QoQ; non-EEB +27% YoY offset the seasonal EEB decline (EEB at ₹52,641 crores) |
| Secured Portfolio | 57% of advances | +27% YoY; retail assets +45% YoY (CV/CE, auto, gold); wholesale banking +38% YoY |
| Gross NPA | 3.1% | Improved; aided by ARC sale of ₹291 crores housing NPAs and ₹597 crores technical write-off |
| Net NPA | 0.9% | Contained; PCR 71.1% reported, 74.3% incl. security receipts, 86% incl. technical write-offs |
| Credit Cost | 1.8% | Down from 2.0% in Q4FY26; EEB credit cost at 3.3%, close to guided level |
| Gross Slippages | ₹1,079 crores | Broadly stable vs ₹1,028 crores Q4FY26; EEB slippages improved to ₹604 crores from ₹690 crores |
| Collection Efficiency | 98.9% (bank) / 98.5% (EEB) | June 2026, ex-NPA; EEB comparable to 98.6% in March 2026 |
| Net Interest Income | ₹2,921 crores | +6% YoY, +5% QoQ; supported by healthy advances growth and stable NIM |
| Non-Interest Income | ₹603 crores (derived: ₹3,524 cr net total income − ₹2,921 cr NII) | Ex-treasury, +22% YoY (Q1FY26 base included ~₹250 crores treasury gains); third-party distribution +47% YoY |
| Net Total Income / Opex | ₹3,524 crores / ₹2,166 crores | Opex +19% YoY, incl. ₹61 crores one-time gratuity (new wage code), salary revisions and higher IT costs |
| Operating Profit | ₹1,358 crores | Supported by credit cost moderation; opex-to-assets at 4.3% vs 4.2% guided |
| Profit After Tax | ₹502 crores | +35% YoY; ROA 1.0%, ROE 7.7% |
| NIM | 6.2% | Stable QoQ despite elevated funding costs; earlier expectation was a modest improvement |
| Capital Adequacy | 18.2% | Tier 1 at 17.5%; LCR 140%, CD ratio 94%, providing growth headroom |
Geographic & Segment Commentary
- EEB / Microfinance: Portfolio at ₹52,641 crores (23% of advances); Q1 seasonal decline significantly lower than prior years; June collection efficiency 98.5% ex-NPA vs 98.6% in March, indicating stable trends; EEB slippages improved QoQ to ₹604 crores; 0-90 DPD rose seasonally to 3.5% on April holiday/election effects. A 100 bps yield hike was implemented in February 2026 with no further hikes in Q1; growth guided at 5-10% with the book capped at 33-35% of advances.
- Secured Non-EEB (Retail Assets): Retail assets grew 45% YoY, led by CV/CE, auto and gold loans; non-EEB overall grew 27% YoY and now constitutes two-thirds of the loan book, with secured portfolio at 57% of advances. Gold loan sourcing was temporarily disrupted April-mid May by RBI circular system changes, now normalized.
- Housing Finance: Housing is 22% of advances; growth moderated as the vertical was restructured into three separate units, causing some teething problems. The bank sold ₹291 crores of housing NPAs to an ARC during the quarter.
- Wholesale Banking: 33% of advances; grew 38% YoY with a strategy to capture full corporate wallet share (corporate salary, vendor payments, cash management, and forex—entered FX business in Q4FY26). Lending rates are comparable to or better than industry average; focus is on generating fee and forex income alongside advances.
- Liability Franchise: Total deposits at ₹1.65 lakh crores (+7% YoY); retail deposits (CASA + retail TD) grew 16% YoY to 74% of total; bulk deposits reduced to 26% share, of which 86% is non-callable; FCNR(B) mobilization of ₹30 crores in Q1. CASA ratio improved sequentially to 29.4%.
Company-Specific & Strategic Commentary
- Deposit Franchise Recalibration: Deliberate reduction of high-cost bulk deposits (-13% YoY, share down from 32% to 26%) to improve granularity and reduce cost of funds; 86% of the remaining bulk book is non-callable, enhancing funding predictability.
- Portfolio Diversification: Advances mix now EEB 23%, wholesale 33%, housing 22%, SBAL 11%, retail & other 11%; strategy targets ~60% secured / 40% unsecured with EEB capped at 33-35% of the book, prioritizing asset quality over aggressive high-yield growth.
- Technology Investment Cycle: IT spend is now
8% of total opex (9.5% incl. depreciation), up from 5-6%, with tech cost +65% YoY driven by vendor/supply-chain inflation; investments in LOS, CBS, CRS and risk tools continue. New digital products launched (Legacy, Elite, Elite+), corporate salary packages revamped, and credit card launch imminent; productivity gains expected after ~18 months. - Branch-Led Sourcing: Branch-sourced assets scaled from ~₹200 crores/month to ₹900+ crores/month in the last quarter, reducing DSA dependency and commissions; 4,400 banking units being activated as sourcing points.
- PSL Compliance: ~40% of the MFI book is currently PSL-compliant; management intends to increase this post-Q1, reducing reliance on PSLC.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| ROA | 1.2%-1.4% at exit Q4FY27 (revised from 1.6%-1.8%) | Revision driven solely by external factors: ~30 bps NIM stretch from rising funding costs and ~10 bps opex stretch from tech-cost inflation; medium-term aspiration of 1.6%-1.8% unchanged |
| Credit Growth (FY27) | ~14% overall; EEB 5%-10%; non-EEB 20%+ | Q1 delivered 16% overall with non-EEB at 27%; EEB flat YoY—will be calibrated based on the operating environment |
| NIM | Hold ~6.2% | Earlier line of sight to 6.5% by Q4FY27 now challenged; defending current margin is the base case, no further upside assumed |
| Credit Cost | 1.6%-1.8% (unchanged) | Q1 at 1.8% with EEB at 3.3%; continued gradual improvement expected |
| Opex-to-Assets | ~4.2% | Q1 at 4.3%; tech costs elevated near term; efficiencies expected to emerge beyond FY28 |
| EEB Mix | 33%-35% of advances | Calibrated growth only; new underwriting model with guardrails prioritizes book health over volume |
| Cost-to-Income | Taper from FY28 | Investment phase continues for ~1 more year; DSA rationalization and branch-led sourcing will drive efficiency |
Risks & Constraints
| Risk | Context |
|---|---|
| Energy crisis / Middle East war | Commercial gas cylinder supply is being rationalized; MFI households face cost escalation that cannot be passed on. Management does not expect immediate delinquency but will not grow EEB aggressively; tech hardware/cloud costs also inflated by chip shortages. |
| Elevated funding costs & liquidity deficit | System durable liquidity requirement ( |
| Unpredictable monsoon | Rural income and MFI collections remain vulnerable; impact described as "still evolving and difficult to assess." |
| Seasonal asset quality flows | EEB 0-90 DPD at 3.5% vs 3.1% Q4FY26, driven by April holidays and West Bengal elections; management views as seasonal but will monitor closely. |
| Technology cost inflation | Vendor costs rising across hardware, cloud, AMC due to supply constraints; bank committed to continued tech investment, limiting near-term opex flexibility. |
Q&A Highlights
ROA Guidance Revision – Rationale & Breakup
- Question: What conservatism is built into the revised ROA guidance of 1.2%-1.4%—is it asset quality or purely funding costs? (Sameer Bhise, Dymon Asia)
- Answer: The revision is entirely due to external factors; internal credit cost is improving (2.0%→1.8%). The two main pressures are the energy crisis impacting the economy and MFI borrowers, and rising deposit rates despite no repo hike (savings costs up 20-25 bps); tech costs are also up 65% YoY. (Partha Pratim Sengupta)
- The 40 bps cut breaks down to ~30 bps NIM stretch and ~10 bps opex stretch; the earlier line of sight to 6.5% NIM by Q4FY27 is no longer built into the plan. (Rajeev Mantri)
Drivers of ROA Improvement Within Revised Range
- Question: At 1.0%-1.1% ROA today (ex one-time gratuity), how do you reach 1.2%-1.4% when NIM upside is capped and credit cost is already at guided levels? (Piran Engineer, CLSA)
- Answer: Expect 10-20 bps improvement from other income (third-party distribution +47% YoY, processing fees) and continued marginal credit cost improvement; no further NIM upside is assumed—holding 6.2% would itself be an achievement. (Rajeev Mantri)
MFI Yields & EEB Growth Approach
- Question: Have you hiked microfinance yields like peers, and are further hikes planned? (Piran Engineer, CLSA)
- Answer: A 100 bps hike was implemented in February 2026 (Q4FY26); no hike since and no immediate plan. EEB growth is calibrated at 5-10% with the book capped at 33-35% of total; a revamped underwriting model with guardrails is in place. Volume benefit is not yet flowing due to the cautious stance amid external risk. (Partha Pratim Sengupta, Rajeev Mantri)
SMA-0 Uptick & Collections Outlook
- Question: SMA-0 rose to 3.5% from 3.1%—is it only holidays or something more? What is the near-term trajectory? (Jai Mundhra, ICICI Securities)
- Answer: April had West Bengal elections and three consecutive business holidays; repayments have occurred but accounts remain in SMA-0, with SMA-1 forward rollover arrested. May-June collections ran at ~99%; management is confident of no further slippage, and recent vintages show clear improvement. (Partha Pratim Sengupta, Surajit Roy Choudhury)
Full-Year Credit Growth & Technology Costs
- Question: What credit growth and tech cost assumptions are built into FY27? (Anand Dama, Nuvama)
- Answer: FY27 credit growth guidance is
14% (EEB 5-10%, non-EEB 20%+); Q1 at 16% overall with non-EEB at 27% is tracking ahead. IT cost is now ~8% of opex (9.5% incl. depreciation), up from 5-6% historically; the bank will try to stay within 10%, then taper to 8% as investments deliver. (Rajeev Mantri, Partha Pratim Sengupta)
Operating Efficiency & DSA Dependency
- Question: When does cost-to-income (~62%) come down? Are DSA commissions and collection agency costs too high? (Digant Haria, Greenedge Wealth)
- Answer: Investments in LOS will shift sourcing from DSAs to branches; branch-sourced assets have scaled from ~₹200 crores/month to ₹900+ crores/month in the last quarter. Cost-to-income will stay around current levels for the next year, tapering from FY28 as tech investments pay off. (Partha Pratim Sengupta, Rajinder Kumar Babbar, Rajeev Mantri)
Wholesale Banking Strategy vs NIM Dilution
- Question: Why prioritize wholesale growth when it dilutes margins in a year of margin pressure? (MB Mahesh, Kotak Securities)
- Answer: Wholesale is the entry point to build full wallet share—corporate salary, vendor payments, cash management, and forex. Lending rates are comparable to or better than industry average; fee income from LC, forex and cash management will offset NII pressure. Growth is calibrated to the 60/40 secured/unsecured mix. (Partha Pratim Sengupta, Satish Kumar, Rajeev Mantri)
Gold Loan Dip, Recoveries & MFI Growth Ambition
- Question: Why did gold loans decline when the industry is strong? What drove the sharp recoveries? Will Bandhan grow slower than the MFI industry? (Nitin Aggarwal, Motilal Oswal)
- Answer: Gold sourcing was hit by RBI circular system changes (April-mid May); sourcing is back to normal and Q2 onwards growth should mirror prior quarters. Recoveries included ~₹120 crores of ARC-related cash recovery from the housing NPA sale. Bandhan remains the MFI leader; growth will stay within the 5-10% bandwidth with the book capped at ~33% of advances. (Hirak Joshi, Rajeev Mantri, Partha Pratim Sengupta)
Key Takeaway
Bandhan Bank posted a resilient Q1FY27: gross advances rose 16% YoY to ₹1.56 lakh crores, led by 27% YoY non-EEB growth (now two-thirds of the book), while deposits grew 7% YoY to ₹1.65 lakh crores as bulk deposits were deliberately cut 13% YoY; CASA climbed 16% to ₹48,479 crores (CASA ratio 29.4%). NIM held at 6.2%, credit cost improved to 1.8% from 2.0%, and PAT rose 35% YoY to ₹502 crores (ROA 1.0%); GNPA improved to 3.1% with PCR of 86% including technical write-offs. Management revised FY27 exit ROA guidance to 1.2%-1.4% from 1.6%-1.8%, citing ~30 bps NIM pressure from rising deposit costs and ~10 bps opex pressure from tech-cost inflation tied to the Middle East energy crisis; the medium-term aspiration is unchanged. Strategy centers on defending NIM, lifting other income 10-20 bps, further credit cost reduction, and capping EEB at 33-35% of advances. Key watch items: funding costs, monsoon, and MFI collection trends.