Tag - credit growth

Collection efficiency improved by 16% in 2QFY22 – Bandhan Bank

Update on the Indian Equity Market:

On Tuesday, NIFTY closed flat at 17,890 (-0.2%) led by REALTY (+4.0%), PSU BANK (+2.4%), and MEDIA (+1.0%). Those in red were METAL (-2%), OIL & GAS (-0.8%) and HEALTHCARE (-0.6%). Top gainers in NIFTY50 were MARUTI (+2.2%), NTPC (+2%), and TITAN (+2%). The top losers were TATASTEEL (-3.4%), GRASIM (-2.2%), and JSWSTEEL (-2%).

Excerpts of an interview with Mr. Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank with CNBC-TV18 on 01st November 2021:

  • Asset quality is improving since the last quarter. In Q1, they faced a severe effect of the second wave of COVID-19, but from September it improved in a way that gives comfort to the bank and its future growth is coming
  • From Q1 to Q2, collection efficiency has improved by 16% and the Special Mention Account-0 (SMA-0) has become half, SMA-1 has come 25 percent down and SMA-2 is flat because they made higher provisions in this quarter.
  • Restructured book amount is ₹ 83.3 bn.
  • The second wave was severe than the first wave and the second wave entered the Eastern region which is Bandhan Bank’s core area in May. Hence, the May-June months were affected by that and the impact was seen in Q1FY22.
  • Eventually, August witnessed some improvement and September is when the bank saw a pick-up.
  • The Assam government has informed customers that if they don’t pay their respective dues, their credit history will be affected and they will not get credit in the future.
  • Ground-level customers are returning back and hence collection efficiency improved by 33% from June to September particularly in Assam.
  • Small borrowers are asking for time which is duly provided and it is seen that 66% of these borrowers are paying to the bank and NPA customers are also paying 65% to them
  • As a result, all of these customers don’t belong to the NPA bucket, they belong to the regular bucket.
  • Every day, 14,000 of Bandhan Bank’s customers are closing their loans which means they are coming to the regular category from the restructured and NPA one.
  • If this continues, the bank expects this to normalize in the next couple of months.

Asset Multiplier Comments

  • Bandhan Bank declared 2QFY22 earnings recently and reported a loss, impacted by significantly higher provisions. The Bank has provided for NPA to protect its balance sheet from the potential impact of a 3rd Covid wave.
  • With economic activity picking up ahead of the festive season, we believe credit growth will pick up. The bank is likely to be a beneficiary of this.

Consensus Estimate (Source: market screener websites)

  • The closing price of Bandhan Bank was ₹ 309/- as of 02-November-21. It traded at 3x/2x/2.1x the book value estimate of ₹ 102/130/150 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 310/- implies a Price/book multiple of 2.1x on the FY24E book value of ₹ 150/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect profit in all quarters of FY21–PNB

Update on the Indian Equity Market:

 

On Monday, Nifty closed higher (+0.7%) at 10,323. Within NIFTY50, BAJAJAUTO (+7.1%), BAJFINANCE (+5.9%), and BAJAJFINSV (+4.8%) were the top gainers, while WIPRO (-1.7%), GAIL (-1.2%) and ONGC (-1.1%) were the top losers. Among the sectoral indices, PSU BANK (+3.9%), METAL (+2.6%), and PHARMA (+2.2%) gained the most.  IT (-0.3%) was the only sector to end in the red.

 

Expect profit in all quarters of FY21–PNB

 

Excerpts of an interview with Mr.S S Mallikarjuna Rao, MD&CEO–Punjab National Bank (PNB)published in Business Standard dated 22ndJune 2020:

  • Management expects credit growth of 6% in FY21E from the earlier estimate of 12%.
  • The credit recovery in MSMEs and retail segments is expected to be faster than other bigger segments. Growth in bigger segments will probably come from January 2021.
  • PNB management expects robust comeback in certain sectors of MSMEs in October. Hospitality and travel segments will be slower to recover but less labor-intensive sectors and highly technology-oriented industries will come back faster.
  • PNB does not see any pain in the hospitality portion of the loan book at the moment. Pain may come from the telecom sector which is in stress. But even in telecom, PNB has non-funded exposure, i.e. bank guarantees are given in favor of government. In PNB’s loan book, they do not see any incremental pain in any sectors apart from those already identified.
  • Mr Rao expects profit in every quarter of FY21. In 1HFY20, PNB might earn Rs 18,000 mn from treasury due to yield advantage. In 1QFY21 itself, PNB has booked Rs 11,000 mn treasury gains compared to normal quarterly run rate of Rs 4,000- 5,000 mn. Provisioning burden will impact the profit, but the backlog of provisions would not continue after September.In 2HFY21E, earning will accrue from lending as operating profit stabilizes.
  • PNB has a high stake of government at 85%. The Government stake has to be brought down in 2 years as the threshold for minimum public shareholding is 25%. So incremental fund raising will be via QIP/ public issue/ LIC/ tier-1 or tier-2 capital.
  • Post amalgamation of PNB with Oriental Bank of Commerce, and United Bank of India, there are a lot of non-core asset in the form of properties that PNB will look to sell. Rs 3,000 – 4,000 mn can be generated through this route in FY21E. PNB does not plan to divest interest in joint ventures and associates, including stake in PNB Housing, as they want to hold onto the brand name and see the entities grow.
  • Post the amalgamation, IRDAI has given exemption to PNB to hold stake in 2 insurance companies. There is no sunset clause for this exemption and PNB will continue to hold share in both the companies.
  • On the progress in amalgamation process, organizational restructuring will be complete from 1st July 2020. Technology integration of surrounding applications and ATMs will be complete by September. Core banking integration for one bank will be done by December 2020, and for the other bank by March 2021.
  • For the amalgamated entity, 500,000 customers are eligible under the emergency credit guarantee scheme and Rs 150 – 160 bn can be disbursed. PNB has already sanctioned loans worth Rs 30 bn to 120,000 customers and the remaining gap can be filled in by first week of July.

Consensus Estimate: (Source: market screenerand investing.com websites)

  • The closing price of PNB was ₹ 35.8/- as of 22-June-2020. It traded at 0.7x/ 0.4x the consensus BVPS estimate of ₹ 53.6/ 86.6for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 52.7/- implies a PBmultiple of 0.6x on FY22E BVPS of ₹ 86.6.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”