Bandhan Bank falls 4% after reporting an 80% fall in its net profit – positive market trends help it bounce back into the green

• Kolkata-based Bandhan Bank is facing the brunt of uncertainties impacting its microlending business.
• Deteriorating asset quality and accelerated asset write-off has resulted in the bank’s net profit plunging by nearly 80% in the March 2021 quarter.
• Analysts suggest that the worst might not be over for the bank.

Microfinance lending could prove to be Bandhan Bank’s achilles heel, if its March 2021 quarter results are anything to go by. Its profit plummeted by nearly 80% and asset quality deteriorated, in large part due to its dual pain points – Assam and West Bengal.

Reacting to the sharp decline in net profit, Bandhan Bank’s share price was down by over 4% in the initial trade today. It has since staged a recovery to bounce back into the green, thanks in part due to an overall bullish trend in the market.


Bandhan Bank reported ₹103 crore profit in the March 2021 quarter – much of it was due to a massive write-off of microlending assets. This is an 80% decline when compared to the same period last year when the profit was ₹517 crore.

However, there are a couple of silvers lining amidst the gloomy outlook – its net interest income rose by 4.6% to ₹1,757 crore. Apart from this, its deposits saw a healthy growth of 37% during the period, increasing to ₹77,972 crore.

Worst not over yet even after accelerated write-off of assets

Analysts believe the worst may not yet be over for the bank.


“Bandhan Bank posted weak results on the operating front with elevated provisioning hurting profitability. Asset quality performance and developments in key states like Assam and West Bengal would call for a cautious approach in the near term,” stated a report by ICICI Securities dated May 9.

Together, Assam and West Bengal make up over 57% of the bank’s microloans. The rising COVID-19 cases in West Bengal and lower collection efficiency of 83% in Assam could increase the stress on the bank’s books.

In contrast, the bank’s collection efficiency in the rest of India is much higher at 97%.

“Bandhan reported a sharp deterioration in asset quality in Q4FY21. More importantly, it has a very low buffer of contingency provisions (45 basis points of assets under management) while the proportion of special mention accounts (SMA) loans remains high at 8.6%,” stated a report by Elara Capital dated May 9.

With several states beginning to announce lockdowns through May, it will be interesting to see how much of an impact it has on Bandhan Bank’s microlending business.

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