Bandhan Bank is top loser

Bandhan Bank is currently the top loser on the BSE, falling 16.25% to Rs. 174.70 at around 11:38 am, down Rs. 33.90 from its previous close of Rs. 208.60. The stock opened sharply lower at Rs. 187.75, touched an intraday high of Rs. 191 and slipped to a low of Rs. 174.30, as investors reacted to the bank’s conservative guidance and margin concerns despite healthy Q1 FY27 profit growth.

Trigger

• Bandhan Bank cut its exit RoA guidance to 1.2–1.4% from the earlier 1.6–1.8%.
• Management indicated that margins are likely to remain under pressure due to higher cost of deposits.
• NIM outlook was reportedly cut to 6.2% from the earlier 6.5%.
• FY27 loan growth guidance was lowered towards the lower end of the earlier 14–15% range.
• The bank flagged deposit pricing, uncertain global conditions, monsoon trends and higher technology costs as key risks.
• Q1 FY27 PAT rose 35% YoY to Rs. 501.66 crore from Rs. 371.96 crore.
• Interest income grew 2.8% YoY to Rs. 5,630.55 crore.
• Provisions declined 40% YoY to Rs. 682.58 crore from Rs. 1,146.90 crore.
• Gross NPA improved to 3.15% from 4.96% a year earlier.

The market is not punishing Bandhan Bank for the reported quarter alone. In fact, the headline Q1 numbers were reasonably strong, with profit up 35% and asset quality improving sharply. The sell-off is because investors are looking beyond the past quarter and focusing on the weaker forward guidance.

The biggest negative is the RoA cut. For banks, return on assets is one of the clearest measures of profitability. A reduction from 1.6–1.8% to 1.2–1.4% signals that management expects profitability to be lower than earlier indicated. That changes the earnings expectation for FY27 and forces the market to reset valuations.

The market is also worried that growth is being consciously moderated. Management’s decision to guide loan growth towards the lower end of the 14–15% range suggests caution around asset-quality risk, especially in a business where microfinance and small-ticket lending have historically created volatility.

The irony is that asset quality actually improved in the quarter. Gross NPA declined by 181 bps YoY to 3.15%, provisions fell 40%, and net profit was aided by lower credit costs. But investors appear to be treating this as backward-looking improvement, while the guidance cut points to fresh pressure ahead.