Bandhan Bank Ltd (BANDHANBNK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Bandhan Bank Q2 and H1 FY27 earnings conference call. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*" then "0" on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikas Mundra. Thank you, and over to you, sir.
Vikas Mundra (Bandhan Bank Ltd): Thank you, Danish. Good evening, everyone, and a very warm welcome to all of you. It's a pleasure to have you with us today as we discuss Bandhan Bank's business and financial performance for the quarter and half yearly ended September 2026. In today's call, we will take you through our business performance, key achievements, and challenges during the quarter. Joining us on the call today are Mr. Partha Pratim Sengupta, Managing Director and Chief Executive Officer; Mr. Rajinder Kumar Babbar, Executive Director and Chief Business Officer; Mr. Ratan Kumar Kesh, Executive Director and Chief Operating Officer; Mr. Vinay Jain, Chief Financial Officer; myself, Vikas Mundra, Head of Investor Relations; and other members of our senior management team. After the management's remark, we will be happy to take your questions and provide any additional clarity on the quarter's performance and our outlook. With that, I would now like to invite Mr. our Managing Director and CEO, Mr. Partha Pratim Sengupta, to share his thoughts on the bank's performance for the quarter. Over to you, sir.
Partha Pratim Sengupta (Bandhan Bank Ltd): Thank you, Vikas. Good evening, everyone, and thank you for joining us today. The second quarter of financial year '27 reflects continued progress in strengthening the fundamentals of the bank. Our performance has been steadily progressing since September 2025
Partha Pratim Sengupta (Bandhan Bank Ltd): we are seeing encouraging progress across several areas that are critical to building a stronger, more diversified and sustainable franchise. During the quarter, we achieved another important milestone in our universal banking journey with the launch of our credit card business. Our four variants: Spark, Ignite, Flare, and Lumina have been designed to address the needs of different customer segments, from Gen Z and emerging affluent customers to frequent travellers and premium lifestyle consumers. We believe credit card will further strengthen our overall customer proposition while creating opportunities to deepen relationships, enhance cross-sell and derive greater value from our growing customer franchise over time. During the quarter, our focus remained on maintaining healthy business growth, accelerating deposit mobilization, improving the composition of our loan portfolio, protecting asset quality and steadily strengthening profitability. I'm pleased to share that we have made meaningful progress across each of these priorities. As a result, during the quarter, we have seen significant improvement in our operating profit and PAT. On the asset side, our loan book reached approximately Rs 1.5 lakh crore, representing a healthy 13% YoY growth. Growth continued to be led by our non-EEB business, which expanded by 20% YoY, providing greater diversification and multiple growth engines to the overall franchise. An encouraging development this quarter has been the stabilization of the EEB portfolio. Following the moderation witnessed in the last few quarters, the degrowth in EEB has now been arrested. While we continue to remain prudent in this segment, the underlying trends have improved, and we are hopeful that the portfolio should return to a healthy growth trajectory from here. Our journey toward building a more secured and diversified balance sheet also continues to progress well. The secured portfolio grew 18% YoY and now represents 57.3% of total advances from 54.9% a year ago. This gradual transformation of our portfolio mix is helping us build a more balanced risk profile while retaining the core strength of our franchise. Housing is another business where we expect to see an improvement from here. Over the last few quarters, we have undertaken significant changes in this business, including verticalization of the structure and several other changes to strengthen execution. These transitions impacted growth and resulted in some near-term asset quality challenges. However, with most of these changes behind us, we believe the business is better positioned for growth. Turning to liabilities. The progress during the quarter has been particularly encouraging. Total deposits increased to approximately 1,73,000 crores, with a strong 4.7% sequential growth without any support from the FCNR (B) deposits. Importantly, this helped bring our net credit-deposit ratio down to 89.5% from around 92% in the previous quarter. Retail term deposits continue to demonstrate healthy momentum, growing by around 17% YoY without any significant contribution from the FCNR (B) deposit mobilization. This gives us greater confidence in the underlying strength and sustainability of our retail deposit franchise. At the same time, I would also like to acknowledge that our performance in savings bank accounts during the quarter was below our expectation. We saw some balances move out following the recalibration of interest rates across certain savings bank buckets. While this affected balances in the near term, our approach is very clear. We want to build a granular and sustainable savings account franchise anchored around deeper customer relationships, transactions, and engagement, rather than being disproportionately dependent on rate-sensitive deposits. We believe this is the right approach for strengthening the quality of our liability franchise over the medium term. To do so, we are working on several levers. Corporate salary accounts are an important opportunity, and our customer proposition is becoming broader with products such as credit cards. We are also strengthening our proposition for HNI and ultra-HNI customers through specific product offerings. At the same time, our larger objective is to grow the mass banking customer base through granular acquisition and deep relationships with our existing
Partha Pratim Sengupta (Bandhan Bank Ltd): connected customers to cross sell and strengthening digital platforms. We also witnessed an increase in bulk deposits during the quarter. Let me clarify that this does not represent any change in our liability strategy. A significant portion of this incremental bulk deposits was raised at shorter tenures primarily for liquidity management, while at the same time we reduced relatively higher cost borrowings. Our philosophy on bulk deposits, therefore, remains unchanged. We do not intend to use bulk funding as a structural source to drive loans growth. It will be used selectively for liquidity and balance sheet management, while our primary focus continues to be on building granular retail deposits. Coming to profitability, our performance during the quarter demonstrates the underlying resilience of the franchise despite changes in the deposit mix, increase in the secured advances mix, and moderation in savings bank account balances, NIMs remained broadly stable at 6.1%. Our overall asset quality position remained healthy with gross NPA at 3.1% and net NPA at 0.9%. Provision coverage, including technical write-offs, remained strong at approximately 87%. Credit costs also remained broadly stable sequentially at 1.8%. The progress we are making across the franchise is also becoming increasingly visible in our earnings performance. Net total income for Q2 FY '27 stood at Rs. 3,665 crores, growing 17% YoY, while operating profit increased by a strong 19% YoY to Rs. 1,556 crores. Profit after tax for the quarter stood at Rs. 622 crores, which is 5.5 times YoY. More importantly, our return ratios showed meaningful improvement during the quarter, with ROA, ROE improving to 1.2% and 9.3% respectively, versus 0.2% and 1.8% in Q2 FY '26. While there is further ground to cover, the direction of movement gives us confidence that our efforts across business growth, balance sheet quality, and profitability are translating into better outcomes. Our capital proposition continues to provide a strong foundation for our growth aspirations. Including profits, our capital adequacy ratio stood at 18.3% with the Tier-1 capital at 17.7%, providing adequate headroom to support future growth while maintaining a prudent capital buffer. Our physical distribution network also expanded further as during the quarter, we added 30 new branches and 14 banking units, taking the total count to 2,001 branches and 4,414 banking units. Overall, I would characterize the second quarter as one of the balanced and steady progress quarters. Deposit mobilization has gathered momentum, our net CD ratio has moderated, the EEB portfolio has stabilized, diversification towards secured businesses continues, asset quality remains under control, and profitability and return ratios have improved substantially. As we enter the second half of the financial year, our priorities remain clear. We will continue to focus on accelerating granular deposit growth, rebuilding momentum in savings accounts, growing our business in a disciplined manner, maintaining asset quality, and improving operating efficiency. We also expect the actions taken across EEB and housing to increasingly contribute to the growth trajectory in the coming quarters. While the external operating environment continues to require careful monitoring, we remain focused on the factors within our control. Our objective is not merely to grow the balance sheet, but to improve the quality, resilience, and profitability of the franchise as we grow. The progress achieved during the first half of the year gives us confidence that we are moving in the right direction. We will remain disciplined in our execution, prudent in our risk management, and focused on building a stronger Bandhan Bank and creating sustainable long-term value for all our stakeholders. With that, I would now like to hand over the call to our Interim Chief Financial Officer, Shri Vinay Jain, who will take you through the financial performance and other key developments during the quarter in greater details. Thank you.
Vinay Jain (Bandhan Bank Ltd): Thank you, sir. Good evening, everyone. Let me take you through the financial and operating performance of the bank for the second quarter of financial year '27. I will
Vinay Jain (Bandhan Bank Ltd): key movement movements across advances and deposits followed by asset quality and the P&L for the quarter and the first half. Starting with advances, as of September 30, 2026, our gross book gross loan book stood at approximately Rs. 1.58 lakh crore, representing a growth of 13.1% year-on-year and 1.8% sequentially. The composition of growth continues to evolve in line with our portfolio strategy. The non-EEB book grew 19.8% year-on-year and now accounts for 66.7% of total advances, highlighting the significant diversification achieved across the franchise. The EEB portfolio stood at Rs. 52,616 crore. Importantly, after the moderation witnessed in the previous few quarters, the portfolio remained broadly stable sequentially and grew 1.7% year-on-year. Growth across our diversified businesses remained strong. Retail assets grew 40 41.9% year-on-year, led by commercial vehicles, construction equipment, auto, and gold loans. Wholesale banking grew 31.6% year- -year, supported by continued business momentum and continuing deepening of our client relationships. Today, the loan book is significantly more diversified with multiple businesses contributing to growth. EEB group lending now constitutes 22% of advances, SBL at 11%, wholesale banking 34%, housing finance 22% and retail and other loans at 11%. This gives us a well-diversified platform to pursue growth across different customer segments. Moving to liabilities, total deposits stood at approximately Rs. 1.73 lakh crore as of September 30th, 2026, registering a growth of 9.2% year-on-year and 4.7% sequentially. Our core retail franchise continued to expand. Retail deposits comprising CASA and retail term deposits grew 11.9% year-on-year, continuing to grow faster than overall deposits. Retail term deposits remain the principle driver, growing 16.8% year-on-year. Overall, retail deposits constitute 72.7% of our deposit base with our focus continuing to strengthening the granular and sustainable components of the liability franchise. CASA balances stood at Rs. 46,132 crore, growing 4.3% year-on-year with CASA ratio at 26.7%. During the quarter, we consciously recalibrated rates across certain saving account buckets, which resulted in a run-off of some higher-cost rate sensitive balances. As a result, period-end savings balances moderated sequentially. On the other hand, current account performance was strong with period-end balances growing 36.9% year-on-year and 18.2% sequentially. Bulk deposit increased by approximately Rs. 4,300 crore sequentially or around 10%. However, this movement should be viewed together with reduction in borrowings. During the same period, borrowing declined approximately Rs. 3,400 crore or 25% sequentially as we substituted relatively high-cost borrowings with shorter tenor bulk deposits. As MD, sir, mentioned, this was primarily a liquidity and funding cost management exercise rather than a change in our longer-term liability strategy. Moving to collections and asset quality, we saw encouraging trends across several underlying indicators during the quarter. Bank-level collection efficiency, excluding the NPA, remained healthy at 99.4% for Q2 FY '27, improving 36 basis points quarter-on-quarter. More importantly, collection performance within EEB strengthened meaningfully with collection efficiency improving to 99.3% in Q2 from 98.9% in Q1 '27. Additional details on collection efficiency are available on slide 22 of the investor presentation. The improvement is also reflected in early delinquency indicators. The EEB DPD pool improved to 2.9% from 3.5% in the previous quarter with the EEB DPD pool declining by approximately 17% sequentially to Rs. 1,529 crore versus Rs. 1,842 crore in Q1 FY '27. Further details have been provided on slide 23 of the investor deck. Gross slippages for the quarter stood at Rs. 1,125 crore, compared to Rs. 1,079 crore in Q1 with EEB slippages at Rs. 655 crore. At the same time, resolution momentum strengthened. Recoveries and upgrades improved to Rs. 481 crore from 481 Rs. 449 crore in Q1. After normalizing the Rs. 119 crore ARC recovery recorded in the previous quarter, net slippages improved by approximately 14% sequentially, providing a better reflection of the underlying asset quality. Further, during the quarter,
Vinay Jain (Bandhan Bank Ltd): also took write-offs of approximately 607 crores, of which 424 crore related to the EEB portfolio. Overall quality remained stable with gross NPA and net NPA at 3.1% and 0.9% respectively. Provision coverage ratio remains stable at 71.2%, increasing to 74.3% including the provision against the SRs, providing a comfortable buffer against potential stress. Let me now take you through the financial performance for the quarter, where we saw a healthy improvement across key earning metrics. Net interest income increased to 14 point increased by 14.54% year-on-year and 1.4% sequentially to 2,960 crores, supported by growth in advances and a resilient margin profile. NIM remained broadly stable at 6.1% compared to 6.2% in Q1. This was despite the continued movement in our asset mix towards secured businesses and moderation in savings account balances. Non-interest income delivered healthy underlying momentum. Processing fee income grew by 30% year-on-year, supported by higher disbursement volumes in the EEB book. Third-party distribution increased by 26% year-on-year, reflecting continued progress in cross-sell across our franchise. On expenses, operating costs in Q2 stood at 2,109 crores, an increase of 15.4% year-on-year. Importantly, income growth and improved operating performance translated into operating profit of 1,556 crores, registering a strong 18.8% year-on-year and 14.6% sequentially sequentially. This improvement combined with stable credit cost at 1.8% translated into a strong increase in profitability. Profit after tax stood at 622 crores, increasing by 23.9% sequentially and 5.5x year-on-year. The improvement in earnings is also visible in our return ratios. RoA increased to 1.2% from 1% in previous quarter, while RoE improved to 9.3% from 7.7%. These movements reflect the improving profitability trajectory of the bank as we progress to FY '27. Let me briefly summarize the half-yearly results. For first half of '27, NII, net total revenue and operating profit was 5 5,881 crores, 7,190 crores and 2,915 15 crores respectively. NIM, operating expense to asset, and credit cost were 6.2%, 4.2%, and 1.8% respectively. The bank reported a net profit of 1,123 crores in H1 '27, registering a growth of 132% year-on-year, with an annualized RoA and RoE of 1.1 and 8.5% respectively. To summarize, Q2 was a quarter of healthy and increasingly balanced progress. Advances managed healthy growth. The portfolio mix continued to diversify. EEB collection and delinquency indicators improved. Retail deposits continued to expand and our funding mix was actively managed. More importantly, this progress is translating into financial outcomes with double-digit net interest income growth, stronger operating profit, stable underlying credit cost, and a meaningfully sequential improvement in both PAT and return ratios. Our balance sheet remains well capitalized and liquid, providing us adequate capacity to support the next phase of growth while maintaining financial discipline. With that, I will hand it back to the moderator, and we will be happy to take your questions.
Moderator: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question comes from the line of Ankit Bihani with Nomura. Please go ahead.
Ankit Bihani (Nomura): Yeah, hi. Thank you for the opportunity and congrats on the quarter. So my question the first question is of on cost of funds and margins. So following the SA rate cut, we have seen our CASA ratio decline 270 bps QoQ.
Ankit Bihani (Nomura): expect the growth to resume? We see that the disbursements have, you know, seen an uptake. And the third question is on the bancassurance. So, post the draft regulations on the commission caps, what is your assessment, what kind of impact do we see happening? And the fourth one is on the ECL, if you could give the day one ECL impact and the second is what it means for the credit cost under it going ahead. Yeah, those are my questions. Yeah.
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