Bandhan Bank cuts Covid-related risk forecasts with better repayment

Kolkata: Bandhan bank has lowered its Covid-related risk forecasts with repayment showing a steady improvement over the last six months, giving the lender confidence in further recovery and asset quality strength.

The bank said it has made additional Covid-related provisions of Rs 2100 crore, covering 2.8% of its portfolio, and it may not need to supplement it significantly going forward if the current repayment trend continues, bank manager Chandra Shekhar Ghosh told ET.

In the early days of the pandemic, the lender considered creating an additional provisioning buffer of 3.5% of its loan book.

At the end of September, it has 76615 crs as outstanding loans including 5000 crs of off-balance sheet exposure.

The bank’s total repayment in terms of value reached 92% in September, while it was 89% for microfinance customers, which accounts for almost two thirds of the bank’s loan portfolio.

Bandhan’s CFO Sunil Samdani said there may be no “significant need for further provision” in the next two quarters as the bank expects the repayment trend to improve further.

In the quarter to September, net profit fell 5% to DKK 920, compared with DKK 972 million in the same period last year due to higher provisions and higher employee costs. The Kolkata-based lender has made an additional provision of Rs 300 in anticipation of Covid-19 related losses during the quarter, bringing the total provision and contingencies in the period to Rs 395 crore against Rs 146 crore in the year ago.

Operating profit grew 25% at Rs 1628 against Rs 1307 in the same period, with asset quality improving. Gross non-performing assets fell to 1.2% at the end of September from 1.8%, while net NPA improved to 0.4% from 0.6%.

The bank has decided to start retail lending in two-wheeled and personal loan segments. Its 1045 bank branches, which have so far been busy mobilizing deposits, will now start retail lending in two-wheeled, consumer-friendly and personal loans.

The bank is also conducting a pilot run in 10 of its 3461 microcredit offices to launch retail verticals. Ghosh said these microcredit offices will in future also be used to mobilize deposits from the country’s rural belt.