Bandhan Bank shares fall 10% on RoA guidance cut after Q1, Motilal Oswal downgrade

Shares of Bandhan Bank Ltd. the Kolkata-based private lender, fell as much as 10% in to their first quarter results on Wednesday, July 22. The results were announced after market hours on Tuesday.

In its post-earnings call, the Bandhan Bank management has stated that it has cut its exit RoA guidance to 1.2% to 1.4% from 1.6% to 1.8% earlier. The management also said that margins are likely to remain under pressure from higher deposit costs.

Deposit pricing, uncertain global environment, monsoon and higher technology costs have been highlighted as some of the key risks for the lender, as highlighted by the management.

As a result of this, brokerage firm Motilal Oswal has downgraded the stock to "hold" from its earlier rating of "buy" but maintained its price target at ₹225 per share, which indicates an upside potential of 8% from Tuesday's closing levels.

Motilal Oswal has cut its financial year 2027 and 2028 earnings estimates for Bandhan Bank by 14% and 6% respectively and expects the lender to deliver Return on Assets (RoA) of 1% and 1.4% over the next two years respectively.

JPMorgan Sees 15% Downside On Bandhan Bank

JPMorgan has maintained its "neutral" rating on Bandhan Bank with a price target of ₹175. This implies a downside of 15% on the stock.

It wrote in its note that the guidance cut was a key focal point in Bandhan Bank's earnings call with a significant cut to the RoA and growth guidance.

The brokerage also said that the lender cut its loan growth guidance to the lower end of the 14% to 15% target.

Bandhan Bank has cited a conscious slowdown in growth owing to rising asset quality risks from higher energy costs and supply chain disruptions, along with an uncertain monsoons.

Nomura Remains Cautious As Well

Nomura has also maintained its "neutral" recommendation on Bandhan Bank and kept its price target at ₹190 apiece.

It cited Bandhan Bank's move to raise average Savings Account rates by 20 basis points and peak Term Deposit rates by 20 basis points as well towards the end of the first quarter on intense deposit competition and therefore, the brokerage expects the cost impact to flow through over the coming quarters.

The brokerage has cut its financial year 2027-2028 Earnings Per Share estimates by 4% to 7% and are building in a 18-24 basis points lower margins, even after lowering credit cost assumptions to 1.8% from 2% earlier.

CLSA Remains Bullish

Amidst downgrades and cautious commentary, CLSA has maintained its "outperform" rating on Bandhan Bank with a price target of ₹235.

It said that while the bank's RoA guidance cut could spook the street, their estimates at 1.3% for financial year 2028, were lower anyway.

Jefferies Cites Valuation Comfort

Jefferies believes at 1.2 times financial year 2027 adjusted price-to-book value, Bandhan Bank's downside appears cushioned.

It has also cut its estimates by over 10% although it does see some benefits from the FCNR-B inflows.

26 analysts have coverage on Bandhan Bank, of which 15 of them have a "buy" rating, seven say "hold", and four have a "sell" rating on the stock.

Shares of Bandhan Bank ended 1.8% lower on Tuesday ahead of the results announcement at ₹207.5. The stock is up 44% so far this year.