Bandhan Bank’s Q1 Surge: Loans Rise, Deposits Dip Amid Market Dynamics

Bandhan Bank has reported a 21.8% year-on-year (YoY) increase in loans and advances, reaching ₹1,25,619 crore for the June quarter, compared to ₹1,03,169 crore in the same quarter last year. This growth contrasts with Federal Bank’s 20% rise in gross advances to ₹2,24,139 crore and YES Bank’s 14.8% increase to ₹2,29,920 crore for the same period.

In terms of deposit growth, Bandhan Bank saw a 22.8% YoY increase, reaching ₹1,33,203 crore, up from ₹1,08,480 crore. Federal Bank’s total deposits grew by 20% to ₹2,66,082 crore, while YES Bank’s deposits rose by 20.8% to ₹2,64,910 crore. Notably, Bandhan Bank’s CASA deposits increased by 13.8% to ₹44,453 crore, whereas Federal Bank’s CASA improved by 9.9% to ₹77,901 crore, and YES Bank reported a 26.1% YoY rise in CASA deposits to ₹81,405 crore.

Bandhan Bank’s retail deposits, including CASA, grew by 19.2% to ₹92,104 crore, making up 69.1% of total deposits. Federal Bank’s retail credit book saw a 25% increase, with a retail to wholesale credit ratio of 56:44.

Despite these gains, Bandhan Bank’s share price fell by around 2% during intraday trading on Thursday. The bank’s quarterly update showed a sequential decline in deposits, although loans exhibited healthy growth. Bandhan Bank’s total deposits for Q1FY25 declined by 1.5% sequentially to ₹1,33,203 crore, despite a 22.8% YoY increase. CASA deposits also declined sequentially by 11.4%, though they grew by 13.8% YoY. Retail deposits, including CASA, dropped by 1.8% sequentially, while bulk deposits fell by 0.7% sequentially.

On a positive note, Bandhan Bank’s loans and advances (including on-book, off-book, and PTC) grew by 21.8% YoY and 0.7% sequentially to approximately ₹1,25,619 crore. However, the decline in deposits impacted the bank’s ratios, with the retail to total deposits ratio dropping to 69.1% from 69.4% in the previous quarter and 71.2% in the same quarter last year. The CASA ratio also fell to 33.4% from 37.1% in the previous quarter and 36.0% a year ago.

Analysts at Jefferies India noted that Bandhan Bank’s loan growth was healthy at 22% YoY, despite it being a seasonally weak quarter. However, they highlighted the need to lower the loan-to-deposit ratio (LDR), which rose by 200 basis points sequentially to 94%. Analysts at Motilal Oswal Financial Services expressed concerns about the bank’s net interest margin and asset quality, maintaining a neutral rating on the stock.

In summary, while Bandhan Bank demonstrated strong loan growth and deposit gains, the sequential decline in deposits and associated ratios raised concerns among investors and analysts. The bank’s performance remains under scrutiny as it navigates these challenges.