Bandhan Bank looks to diversify, focus on granular deposits

The analysts’ meeting was attended by C.S. Ghosh, managing director and chief executive; Sunil Samdani, chief financial officer; Siddhartha Sanyal, chief economist and head of research and various vertical heads.

The bank has embarked on the journey to transform itself into a true universal bank, led by geographic diversification — incrementally in Uttar Pradesh, Bihar, Gujarat, Karnataka, Andhra, and Telangana, among others — as well as assets in non-microfinance portfolio, wrote analysts at Emkay Global Financial Services.

The Kolkata-based private lender, Emkay said, remains determined to grow its non-MFI (microfinance) book, including affordable housing, prime housing, micro and larger loans against property, gold, cards, vehicle finance, personal loan, and commercial banking loan pool at a faster pace. This, the bank believes, would lead to a reduction in the share of the otherwise volatile group MFI portfolio to 28% by FY25, from 40% currently.

“However, we believe this structural portfolio shift towards secured and low-yielding assets should have a bearing on margins in the long run but, at the same time, reduce asset quality volatility,” Emkay said in a report on 1 December.

Analysts at Motilal Oswal Financial Services said the bank is looking to increase the current and savings account (CASA) as a percentage of total deposits to 44% from 41% at present. It is also looking to expand its geographical footprint to garner incremental deposits.

“Retail deposits will remain a focus area, with the mix likely to increase to 80% from 74% at present. The mix of current account deposits is likely to increase to 9-10% over the next two-to-three years from 5.7% at present, as against 12.7% for the banking industry,” the Motilal note said.

It said that around 30% of proposed new branches are planned in five large deposit states, with key focus on the National Capital Region and Uttar Pradesh. The mix of branches in eastern India is likely to moderate to 47% by FY25 from 54% at present, while the mix of branches in metros will fall to 24%, from 31% at present, over a similar period.

That said, the bank expects the stressed loan portfolio in its emerging entrepreneurs business (EEB) to peak at ₹10,200 crore in the December quarter and subsequently moderate to ₹9,700 crore by the end of March.

Stressed assets would include non-performing loans, restructured assets and loans where repayment is due between 31 and 90 days. Announced in September 2020, the vertical, apart from microloans, manages micro home loans, micro bazaar loans and micro enterprise loans.