Bandhan Bank - in a sweet spot?

(Varun) #103

my working for combined entity… bandhan should have about 161 cr shares post share swap. and combined profit of rs 2300 cr for the year ending 31-03-2019… (merger is effective 1-1-19)… total market cap of the company is Rs 80000 cr that means 35 PE… If I invest via GRUH its 5% discount that is PE of 33.5.

bandhan bank wont be able to expand branches as it still wont be able to make it to 40% promoter holding… so I am not sure if they can convert gruh branches to full bank branch.

the combined entity will be more stable as there are less microfinance loans… and they get the benefit from GRUHs management experience… both entities cater to similar customer base… LIG / MIG

growth should moderate as the base has become bigger… but cross selling provides huge oppurtunies. Also, huge geographical expansion.

also HDFC being 15% holder will serve the company / new bank better as they may say that it is only a financial investment but they can always benefit from HDFC management. HDFC Intend to keep atleast 9.9%…

(Vishal Bharti) #104

BTW, it would have been very worse if Bandhan had acquired some low quality company. With Gruh, even though its slightly expensive and is earning dilutive - they have laid a foundation for a strong financial inclusion platform for rural/semi-urban PAN-INDIA. Bandhan has already been strong in this area(remember how they smoothly handled the demonitization storm). With Gruh’s low cost housing products and cutsomers in western region AND with HDFC as a investment partner - they have strengthened it further to the maximum possible. There is a long run-away for quality and high growth established for future. Also, some reports are saying the EPS for combined entity would be ~18-19 for next year - that means its available at a forward 1 year PE of approximately 25 - which is not too expensive.

(Ashish) #105

Does anyone expect any regulatory hurdle in this merger similar to what happened in HDFC Life, Max life issue ?

(Varun) #106

i do not think so. it is a straight forward merger like IDFC Bank / Capital First or Indusind / BFIL.

(Ashish) #107

There was some discussion on TV about potential conflict of interest as HDFC will now be a major share holder in both HDFC Bank and Bandhan Bank, hence asked. Thanks for clarifying.

(PrinceVegeta) #108

As per my understanding following approvals would be needed

1 - Shareholders approval from Bandhan and Gruh shareholders. (Not a major hurdle as significant shareholding is by promoters)

2 - RBI approval for merger: since public depositors money is at stake and also since only Bandhan is holding banking license, this might entail a few restrictive conditions

Not to forget, new Bandhan Bank (merged) itself needs RBI approval for opening branches before the promoters decrease their shareholding %.

Another impact would be now lending to Gruhs customers would be based on Bank MCLR rates. There have been many calls for bringing NBFC lending under Bank MCLR rate regulation for e.g.

Gruh is known to lend at premium rates compared to peers, and this might have some impact on spreads.

HDFC also needs RBI approval for keeping its stake in the New Bank.

3 - NCLT approval since both are companies registered under Companies Act.

(Harish Assudani) #109

Yesterday shri Deepak Parekh the chairman of HDFC Ltd has clarified that their investment resulting through merger of GRUH with BANDHAN will remain solely financial investment as was in RBL previously, this will not be a strategic one.

(Divyanshu Bagga) #110

Internationally, research shows that concentrated ownership “significantly reduces” banks’ nonperforming loan ratios

Wish RBI would take note of the same and do away with unnecessary restrictions.

(Divyanshu Bagga) #111

Bandhan’s results are out. 50% plus growth in interest income and expansion of NIM is a big positive. But ILFS, though fully provisioned, raises question on capability of Bandhan Bank to lend to corporates. For now, it needs to stick to it’s strength, microlending, until it develops the required capabilities.

(Vishal Bharti) #112

Its a dhamaka result - loans up 46%, if provisioning for ILFS had not been done (100%) - profit would have been up 90% plus. CASA is 41.4 % [[up 71% YoY]. NIM is 10.7%. Cost to income ratio at 33% - lowest one for any bank in India.

To a question in conference call on if they would grow Gruh faster than 20% at current - they said its obvious… Regarding retaining Gruh management - Mr Ghosh said he said he talked individually to everyone in Gruh management and they were/are equally excited - after talking to them only, they went ahead with the acquisition. They seem very excited and confident of the “investment” they have done in Gruh to capture the BIG affordable housing loans opportunity utilizing the lower cost of funds from Bandhan(6.3%).

(abhishkjain2626) #113

CASA ratio at 41%, which is on par with HDFC. That too in only 3 years. What a remarkable feat!

(S_Banerjee) #114

Yes, that is remarkable achievement and it was expected. As per Mr. Ghosh this ILFS corporate lending was a mistake and they will not repeat it. As of now they will focus on their expertise area which is micro lending. And I know the defaulter rate in micro lending is almost zero.

I would say this is just the starting point of a great journey. Its earning number will attract more and more people with their banking service as well as direct investment.

(Vishal Bharti) #115

"These loans (IL&FS) were given in 2016 and some about a year back. This was the only large loan we had given. It was a AAA company and a secured loan. Investors used to tell us that all our loans are unsecured and we went for a secured, highly rated loans. It turned out to be a mistake,” said CEO Chandra Shekhar Ghosh.

(Abhishek Basumallick) #116

Highlights of concall: (source: capital market)

  • The bank has continued strong growth momentum while posting strong 46% growth in the loan book to Rs 35599 crore, while deposits also jumped 37% to Rs 34639 crore end December 2018.
  • The bank has continued to focus on three key segment such as microfinance, MSME and affordable housing, while these segments will continue to be under focus ahead.
  • The bank has classified its exposure to IL&FS group amounting to Rs 384.95 crore as NPA in Q3FY2019, while the exposure is fully provided in Q3FY2019 itself.
  • The GNPA ratio of the bank jumped to 2.41% end December 2018 from 1.29% end September 2018, excluding the IL&FS account the GNPA ratio was flat at 1.3% end December 2018. On account of full provisions for IL&FS account, the net NPA ratio of the bank was flat at 0.7% end December 2018.
  • The net profit of the bank is showing jump of 93%, excluding the provisions made for IL&FS exposure, against 10% reported growth in the net profit for Q3FY2019. The ROA was also higher excluding IL&FS provision at 5.6% and RoE at 21.2% for Q3FY2019.
  • The bank had already started de-recognizing interest rate on IL&FS exposure from the beginning of FY2019, so the interest income reversals were lower at Rs 3 crore in Q3FY2019.
  • The bank has maintained the cost-to-income ratio at 33.7% in Q3FY2019.
  • The bank has sharply improved the CASA deposits ratio to 41.4% end December 2018. The retail deposit to total deposit was strong at 84.8% end December 2018.
  • Added 9.22 lakh customers during the quarter with total customer base reaching to 15.33 million with micro banking customers at 12.15 million and non-micro at 3.18 million end December 2018.
  • The bank has written back treasury investment provision of Rs 96.50 crore on account of favorable yield curve movement in AFS and HFT portfolio in Q3FY2019.
  • The bank has recorded loan disbursements of Rs 13000 crore to 21.68 lakh customers in Q3FY2019.
  • The bank has approved the merger of Gruh Finance with Bandhan Bank. The bank has to reduce promoter shareholding below 40% in line with the regulatory requirement. Currently bank does not have further proposal for merger on its table.

(S_Banerjee) #117

This is my first banking experience with Bandhan bank,not an endorsement.

They responded a Twitter message regarding account opening query and got a call from their main office,then it was transferred to my local branch office. Yesterday this account open process was done, a staff came to my home and everything done in a hassle free manner. Came to know that they operate also in Saturday Sunday in 4 prime location branch in Kolkata, my branch would be one of them.


Do you think these kind of services would continue for years to come? I know that you have a high allocation to Bandhan in your PF, and know about them, so asking.

(S_Banerjee) #119

That is difficult to predict. But only thing I can say they are growing too fast. I can see in front of my eyes. Services degrate with increasing size,that is true. But here is the challenge mngmnt needs to take. And I am optimistic.

(Ranga Kiran) #121


What is the difference between small finance bank and bandhan bank ? What are the advantages and disadvantages?

(MD Razi G Haider) #123

Small Finance Bank

  1. Area of operations will be smaller
  2. Can’s extend large loans
  3. 50% loans to Micro, Small and Medium Enterprises (MSME) Sector
  4. .Not allowed to set up a subsidiary to offer non banking financial services to the customers
  5. Target customers are MSME, Small Farmers, Small Businessman, Unorganized Workers, etc.

Bandhan Bank

  1. Bandhan Bank has no restrictions on providing any kind of products, functions and services to the customers
  2. Bandhan can extend lending services such as home loans, personal loans, etc. without any restriction
  3. No cap on accepting deposits from its customers Can issue Debit as well as Credit Cards
  4. Bandhan is allowed to invest the money they collect in form of deposits in open market

So Bandhan is far superior than SFB, it is a full fledge bank and have better flexibility in operations than sfb