Tag - Bandhan bank

Housing Finance book is expected to grow five times in next five years – Bandhan Bank

Update on the Indian Equity Market:
Markets started the week on a positive note with Nifty50 rising 95 points higher at 11,466. Among the index, ZEEL (4.8%), KOTAKBANK (3.5%) and INDUSIND (3.3%) were the top performing stocks while POWERGRID (-2.0%), M&M (-1.2%) and ADANIPORTS (-1.1%) were the laggards. Within the sectoral indices, PVT BANK (2.4%), BANK (2.4%) and FIN SERVICE (2.1%) were the top performing sectors whereas REALTY (-1.0%), PHARMA (-0.4%) and IT (-0.3%) were the only the sectors closed the day in red.
Excerpts of an interview with Mr.Chandra Shekhar Ghosh, Managing Director & CEO, Bandhan Bank (Bandhan) published in Economic Times dated 23rd August 2020:
It is good that failure on large exposures happened very early into Bandhan Bank’s journey, which helped limit the losses and affirmed that it will never lend to the large segment again.
He said that there is a huge opportunity in the rural affordable housing segment. The focus is on housing finance space and the target is to grow the loan book by five times in the next five years to Rs 1 lakh crore. This, he expects will occupy nearly a third of the Rs 3.5 lakh crore lending book that the bank has targeted.
The business has had cycles of good growth, which gets followed with some impact due to changes in the overall environment beyond the bank’s control, and specifically mentioned demonetisation and the current COVID-19 pandemic which led to a full wipeout in collections.
When asked about setbacks like repayments impact due to the anti-CAA protests over the last year, he said till date, not a single rupee of loan has been written off in Assam and the reverses it faced because of the protests are a part of business.
After becoming a bank, its rate of lending has reduced to 17.95 per cent from 22.4 percent earlier and will reduce further as the share of the low-cost deposits will grow, he said, admitting that in the beginning, getting people to deposit was a challenge because the whole system had been tuned as a model focusing on lending and not liabilities.
Small borrowers prefer paying because they understand the importance of a commitment to repay and do not mind sharing the benefits of a growing business with the financier who helped make it possible. He also said more than the rate of interest, a borrower is more concerned with delivery of simple and timely credit for all.
Consensus Estimate: (Source: marketscreener website)
The closing price of Bandhan Bank was ₹ 295/- as of 24-Aug-2020. It traded at 2.7x/ 2.3x/ 1.9x the consensus Book Value estimate of ₹ 108/ 129/ 159 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 372/- implies a BV multiple of 2.3x on FY23E Book Value of ₹ 159.
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