First, Why is Bandhan Bank considered to be the most profitable bank?
Second, How did Bandhan Bank perform in the recent quarter in comparison with its competitors?
Third, In recent times, Bandhan Bank's shares went down by 10% and further. What is the reason behind it?
Bandhan Bank came in news in March 2018 that a bank's IPO is going to be released which has more than 10 million customers in micro landing. Micro landing as a concept was very new then. People got to know for the first time that this bank will give out low ticket size loans to low-income groups. People realize that the risk in this business model is lesser as the loss is lesser if the loan is unpaid.
When Bandhan Bank's IPO is released, it gets priced from Rs.370 to Rs.375. Many people subscribe to it, it gets subscribed 15 to 20 times as per the IPO details. It gives away a really good profit on the day it gets listed. The IPO gets listed at Rs.485 at BSE and at Rs.499 at NSE. People receive a good profit on Day 1 itself. From here, the story begins of Bandhan Bank.
Bandhan Bank's business model is of Microlending. If we talk about Microlending in detail then. Now there are many competitors of microlending. In microlending, they make small groups in order to lend money to people of lower-income. Here their margin is more and the risk is lesser cause their risk gets diversified.
You might have understood the overall business model of Bandhan Bank on how is it different from other banks.
Let's talk about Bandhan Bank's recent quaterly results. We will also try to make you understand how is its business model different from other banks we are talking of the financial results.
First, let's talk about the Net Interest Margin:
Net Interest Margin of Bandhan Bank this quarter was 8.15%. If I compare it with the last quarter then this no. as 8.63%. Net Interest Income for Bandhan Bank has comparatively come down from the last year.
If I talk about the 2 big players of the private banking sector: HDFC and ICICI bank's Net Interest Margin. You will get surprised to know that HDFC Bank's Net Interest Margin is 4.3% and ICICI Bank's Net Interest Margin is 3.69%.
In comparison to them, Bandhan Bank's Net Income is double or a little more than double. Cause of which Bandhan Bank is known as India's most profitable bank.
The reason it being a micro-lending bank, it charges high interest on its lending thus its Net Interest Margin is high.
Like we have told you before, for any bank to have a CASA Ratio of above 40% is considered to be a good thing cause if I talk about the private sector, HDFC bank's CASA is at 40%, ICICI's CASA ratio is at 41%.
Here If I talk about Bandhan Bank Ratio, its CASA Ratio is above 45%. CASA Ratio is how much the bank receives at a lower interest cause of which it earns more net interest margin. If you add all these chains, you will realize how this business model works. Bandhan Bank gets money at a lower rate from CASA Ratio where its CASA Ratio is of above 45%. It gives money out as loans at a higher interest cause of this its Net Interest is more than the other banks.
After the Net Interest Margin, Let's go to Asset Quality.
Now let's figure out how is Bandhan Bank's asset quality, Gross NPA and Net NPA and how it performs in consideration with other banks?
Bandhan Bank's Gross NPA is of 1.43% in comparison with 1.47% of the same quarter of last FY. In this comparison, its Gross NPA has gone down by a bit which means in the difficult times, its Gross NPA has not gone up by much.
Now I will talk about how other banks Gross NPA is HDFC Bank has a Net NPA of 1.36%, ICICI Banks Net NPA is 5.46% which means in comparison to both these banks Bandhan Bank's Gross NPA is lesser but its not right to compare the Gross NPAs directly with these banks. I have just mentioned it as an example here.
As the business model of Bandhan Bank is different from these banks cause of which their Gross NPA is usually lesser than other banks. Talking about Net NPA, Bandhan Bank's Net NPA is of 0.48% in comparison to last FY'S same quarter at 0.58%.
In comparison, its Net NPA has comparatively gone low. If we talk about asset quality, then we cant find any red flags in the asset quality cause its Gross NPA and Net NPA, both have gone down in comparison with its last financial year.
In the case of Yes Bank, its Capital Adequacy Ratio is around 7% to 8% which is quite risky. Yes Bank even raised an FPO in the recent time. As an example, If we talk about HDFC Bank's Capital Adequacy Ratio is around 19% which is a very good no. in banking sector wherein if we talk about ICICI Bank, their Adequacy Ratio is well above 15% cause of which it is considered to be a good ratio.
Do you know Bandhan Bank's Capital Adequacy Ratio is the highest in the whole banking sector at 24.5%. In terms of Capital Adequacy Ratio, we cannot find any risks as such and its Capital Adequacy Ratio as per regulation is high thus they would not have to face any potential risk in the future by the recent quarterly results. In comparison with other banks, this ratio can be considered one of the highest in the banking sector.
Talking about the Net Profit, the Bandhan Bank had said it has recorded a Net Profit of 550 crores in the recent quarter. If we compare it with the same quarter of the financial year then can see a 32% drop.
Talking about Operating Profit, It has mentioned it as Rs 1574 Cr, they have recorded a 17% increment here as compared to same quarter of the last financial year. Net Interest Income recorded was Rs. 1811 Cr and here also we can see an increment of 15%. This was part two of the Bandhan Bank wherein we compared the recent quarterly results with other banks.
Bandhan Bank's share price went down by 10% in the last few days, and what is the reason behind it?
The reason behind it is the Block deal. If a company sells a lot of shares at one time then it is sold through a Block deal. Block Deal normally function through Exchange via which buying and selling is done. On Monday, Bandhan Bank did the biggest Block Deal of the entire share market which is done via the exchange. Shares worth 333 million were sold through this Block Deal and these shares were sold at a discount of 9% as compared to Friday's last closing price. So on Monday when the shares worth 333 million were sold at a 9% discount, it was obvious for it to go down. Cause of which Bandhan Bank's share price went down.
Now the question is why did Bandhan Bank do this Black Deal?
The reason bein with high promotor holding since sometime Reserve Bank has mentioned that there are certain private banks wherein promotor holding is very high Reserve bank has asked to reduce the promoter holding. Thus the shares will have to be sold off from the promotor holding. Due to which Bandhan Bank sold off its shares to bring down its promotor holdings.
Here if we give an example of the same situation then with Kotak Mahindra Bank too same thing has happened in their shareholding pattern, their promotor holding is quite high. Thus RBI is, again and again, asking them thus they will soon have to cut their shares from promoters holding. Don't know when Kotak Mahindra Bank will bring down its promotor holding but Bandhan Bank has done so.
If I talk in detail of the Block Deal then the major buyers in Block Deal were FPIs, Foreign Portfolio Investors. FPIs have invested highly in Bandhan Bank.
If you take out the data from Monday, you can see heavy buying from FPOs. Cause this data is completely skewed as they bought a lot of shares during the Block deal at Bandhan Bank. Thus maximum buying is done through FPIs and selling was done via promotor group. In order to reduce their promotor holdings as per the RBI guidelines. This was the reason for Bandhan Bank's share price tob go down by 10%.
This article was completely for educational purpose only. We did not want to give any advice or recommendation on buying and selling now or in the future.
When Bandhan Bank's IPO is released, it gets priced from Rs.370 to Rs.375. Many people subscribe to it, it gets subscribed 15 to 20 times as per the IPO details. It gives away a really good profit on the day it gets listed. The IPO gets listed at Rs.485 at BSE and at Rs.499 at NSE. People receive a good profit on Day 1 itself. From here, the story begins of Bandhan Bank.
Bandhan Bank's business model is of Microlending. If we talk about Microlending in detail then. Now there are many competitors of microlending. In microlending, they make small groups in order to lend money to people of lower-income. Here their margin is more and the risk is lesser cause their risk gets diversified.
Now, we will try to answer the question of why is Bandhan Bank considered to be so profitable?
You might know how the major income of the bank is derived. People keep their money in the bank, on which bank gives interest and the same money lent further. The difference in the earning is the income for the bank, it is also called Net Interest Margin. Like we told you about Bandhan Bank, it gives loan in smaller portions to low-income group people and when it gives out the loan, it charges a very high interest cause of which its business model is very efficient, Bandhan Bank CASA Ratio is really good. Wherein they get money at the same rate but gives away money as a loan at a higher interest. Cause of which its Net Interest Margin is very good, making it India's most profitable bank.You might have understood the overall business model of Bandhan Bank on how is it different from other banks.
Let's talk about Bandhan Bank's recent quaterly results. We will also try to make you understand how is its business model different from other banks we are talking of the financial results.
First, let's talk about the Net Interest Margin:
Net Interest Margin of Bandhan Bank this quarter was 8.15%. If I compare it with the last quarter then this no. as 8.63%. Net Interest Income for Bandhan Bank has comparatively come down from the last year.
If I talk about the 2 big players of the private banking sector: HDFC and ICICI bank's Net Interest Margin. You will get surprised to know that HDFC Bank's Net Interest Margin is 4.3% and ICICI Bank's Net Interest Margin is 3.69%.
In comparison to them, Bandhan Bank's Net Income is double or a little more than double. Cause of which Bandhan Bank is known as India's most profitable bank.
The reason it being a micro-lending bank, it charges high interest on its lending thus its Net Interest Margin is high.
Current Account and Saving Account. What is the CASA ratio for this bank?
Like we have told you before, for any bank to have a CASA Ratio of above 40% is considered to be a good thing cause if I talk about the private sector, HDFC bank's CASA is at 40%, ICICI's CASA ratio is at 41%.
Here If I talk about Bandhan Bank Ratio, its CASA Ratio is above 45%. CASA Ratio is how much the bank receives at a lower interest cause of which it earns more net interest margin. If you add all these chains, you will realize how this business model works. Bandhan Bank gets money at a lower rate from CASA Ratio where its CASA Ratio is of above 45%. It gives money out as loans at a higher interest cause of this its Net Interest is more than the other banks.
After the Net Interest Margin, Let's go to Asset Quality.
Now let's figure out how is Bandhan Bank's asset quality, Gross NPA and Net NPA and how it performs in consideration with other banks?
Bandhan Bank's Gross NPA is of 1.43% in comparison with 1.47% of the same quarter of last FY. In this comparison, its Gross NPA has gone down by a bit which means in the difficult times, its Gross NPA has not gone up by much.
Now I will talk about how other banks Gross NPA is HDFC Bank has a Net NPA of 1.36%, ICICI Banks Net NPA is 5.46% which means in comparison to both these banks Bandhan Bank's Gross NPA is lesser but its not right to compare the Gross NPAs directly with these banks. I have just mentioned it as an example here.
As the business model of Bandhan Bank is different from these banks cause of which their Gross NPA is usually lesser than other banks. Talking about Net NPA, Bandhan Bank's Net NPA is of 0.48% in comparison to last FY'S same quarter at 0.58%.
In comparison, its Net NPA has comparatively gone low. If we talk about asset quality, then we cant find any red flags in the asset quality cause its Gross NPA and Net NPA, both have gone down in comparison with its last financial year.
In the case of Yes Bank, its Capital Adequacy Ratio is around 7% to 8% which is quite risky. Yes Bank even raised an FPO in the recent time. As an example, If we talk about HDFC Bank's Capital Adequacy Ratio is around 19% which is a very good no. in banking sector wherein if we talk about ICICI Bank, their Adequacy Ratio is well above 15% cause of which it is considered to be a good ratio.
Do you know Bandhan Bank's Capital Adequacy Ratio is the highest in the whole banking sector at 24.5%. In terms of Capital Adequacy Ratio, we cannot find any risks as such and its Capital Adequacy Ratio as per regulation is high thus they would not have to face any potential risk in the future by the recent quarterly results. In comparison with other banks, this ratio can be considered one of the highest in the banking sector.
Talking about the Net Profit, the Bandhan Bank had said it has recorded a Net Profit of 550 crores in the recent quarter. If we compare it with the same quarter of the financial year then can see a 32% drop.
Talking about Operating Profit, It has mentioned it as Rs 1574 Cr, they have recorded a 17% increment here as compared to same quarter of the last financial year. Net Interest Income recorded was Rs. 1811 Cr and here also we can see an increment of 15%. This was part two of the Bandhan Bank wherein we compared the recent quarterly results with other banks.
Share Price of the Bandhan Bank:
Bandhan Bank's share price went down by 10% in the last few days, and what is the reason behind it?
The reason behind it is the Block deal. If a company sells a lot of shares at one time then it is sold through a Block deal. Block Deal normally function through Exchange via which buying and selling is done. On Monday, Bandhan Bank did the biggest Block Deal of the entire share market which is done via the exchange. Shares worth 333 million were sold through this Block Deal and these shares were sold at a discount of 9% as compared to Friday's last closing price. So on Monday when the shares worth 333 million were sold at a 9% discount, it was obvious for it to go down. Cause of which Bandhan Bank's share price went down.
Now the question is why did Bandhan Bank do this Black Deal?
The reason bein with high promotor holding since sometime Reserve Bank has mentioned that there are certain private banks wherein promotor holding is very high Reserve bank has asked to reduce the promoter holding. Thus the shares will have to be sold off from the promotor holding. Due to which Bandhan Bank sold off its shares to bring down its promotor holdings.
Here if we give an example of the same situation then with Kotak Mahindra Bank too same thing has happened in their shareholding pattern, their promotor holding is quite high. Thus RBI is, again and again, asking them thus they will soon have to cut their shares from promoters holding. Don't know when Kotak Mahindra Bank will bring down its promotor holding but Bandhan Bank has done so.
If I talk in detail of the Block Deal then the major buyers in Block Deal were FPIs, Foreign Portfolio Investors. FPIs have invested highly in Bandhan Bank.
If you take out the data from Monday, you can see heavy buying from FPOs. Cause this data is completely skewed as they bought a lot of shares during the Block deal at Bandhan Bank. Thus maximum buying is done through FPIs and selling was done via promotor group. In order to reduce their promotor holdings as per the RBI guidelines. This was the reason for Bandhan Bank's share price tob go down by 10%.
This article was completely for educational purpose only. We did not want to give any advice or recommendation on buying and selling now or in the future.
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