Bandhan Bank Q1 FY27 Earnings Call — Analysis (NSE: BANDHANBNK)

Bandhan Bank slashes Q4FY27 ROA target to 1.2–1.4% from 1.6–1.8% citing external headwinds, despite steady Q1 profit growth of 35%.

27 Jul 2026 · Analysis by Alpha Inflection

The take

Q1FY27 Net Interest Income (NII) ₹2,921 Cr ( +6% YoY ) . New guidance — FY27 other income improvement 10–20 bps .

Results

Q1FY27 PAT ₹502 Cr +35% YoY; advances ₹1.56 lakh Cr +16% YoY; NII ₹2,921 Cr +6% YoY; NIM 6.2% stable; Gross NPA 3.1%, Net NPA 0.9%; CASA ratio 29.4% sequential improvement.

Financial highlights

Guidance

FY27 ROA guidance revised downward to 1.2–1.4% at Q4FY27 exit, while credit cost guidance of 1.6–1.8% and advances growth of ~14% maintained.

What management committed to

• Bank expects overall advances growth of 14% in FY27, with non-EEB growing 20%+ and EEB growing 5–10%. — 14% overall; non-EEB 20%+; EEB 5–10%, FY27
• Credit cost for FY27 is expected to remain in the 1.6–1.8% range. — 1.6% to 1.8%, FY27
• ROA at the exit of Q4FY27 is likely to be in the 1.2–1.4% range, revised down from the earlier aspirational target of 1.6–1.8% due to external headwinds. — 1.2% to 1.4%, Q4FY27
• The EEB portfolio will be maintained at a maximum of 33–35% of total advances; the bank will not run after this high-yield book aggressively. — 33% to 35%, ongoing
• The bank will aim to hold Net Interest Margin at approximately current levels (~6.2%) for the remainder of FY27, with no further upside built in due to funding cost pressures. — ~6.2%, FY27
• Other income (as a share of assets) is expected to improve by 10–20 basis points through the year. — 10–20 bps, FY27
• Operating expenses to average assets ratio will be managed at around 4.2–4.3% for FY27, with efforts to bring it to 4.2%. — 4.2–4.3%, FY27
• IT cost as a percentage of total opex (including depreciation) will remain within 10% in the near term and reduce to ~8% once tech investments mature (post FY28). — FY28

Key themes

Macro headwinds force ROA guidance cut

Operational commentary

• ROA aspiration revised down to 1.2-1.4% by Q4FY27 exit due to external headwinds: funding cost rise, tech cost inflation, Middle East energy crisis; earlier 1.6-1.8% target pushed beyond FY27.
• Non-EEB secured portfolio grew 27% YoY, now 67% of advances, with retail assets up 45%, wholesale banking up 38%; secured book at 57% of total advances.
• Microfinance (EEB) portfolio seasonal decline contained; slippages improved sequentially to ₹604 Cr from ₹690 Cr; credit cost of EEB reduced to 3.3%, close to guidance.
• Deposit quality improved: CASA ratio 29.4%, retail deposits +16% YoY; deliberate bulk deposit reduction (-13% YoY) to improve funding stability; bulk share down to 26%.
• Housing NPA sale to ARC ₹291 Cr and technical write-off ₹597 Cr executed to clean up portfolio.
• Yield on MFI loans hiked 100 bps in Feb '26, no further hikes planned; calibrated EEB growth at 5-10% for FY27 but maintained leadership.
• IT costs soared 65% YoY, now 9.5% of opex incl. depreciation; management expects investments to peak and efficiencies to emerge post FY28.
• Core fee income momentum strong: third-party distribution +47% YoY, processing fees recovered; other income adjusted for treasury gains grew 22% YoY.
• Branch channel activated for secured asset sourcing, reducing DSA dependency; monthly branch-sourced volume rose from ₹200 Cr to ₹900 Cr.
• Liquidity comfortable: LCR 140% despite CD ratio of 94%; FCNR deposits mobilised ₹30 Cr.

Analyst Q&A

• Q. What kind of conservatism is built into the revised ROA guidance; could improving liquidity offset pressures?

  MD: Revision is entirely due to external factors (energy crisis, funding cost rise, tech cost inflation) not internal; credit cost is improving. CFO: other income and further marginal credit cost improvement are key levers, but NIM upside is now challenged; we aim to hold NIM. Liquidity is comfortable for the bank.

• Q. Why is microfinance growth not accelerating even after yield hikes, and what is the trajectory of SMA-0?

  EEB growth calibrated at 5-10% due to cautious stance on external risks; quality focus over volume. SMA-0 spike temporary due to April holidays and West Bengal elections; slippage from SMA-0 to SMA-1 arrested, collections normalized to 99% in May/June.

• Q. Why grow the lower-margin wholesale banking book aggressively when overall margins are under pressure?

  Wholesale banking is a vehicle to capture ecosystem wallet share and other income (forex, cash management), not just vanilla advances. Rates are comparable to industry average; strategy is to build granular fee-based income through that book.

• Q. Is there any headroom to push back IT cost increases for a couple of quarters?

  MD: Investment in LOS, DCDR, automated DR is critical for future capabilities and cannot be postponed. Tech costs will grow slower after 18 months when productivity gains kick in.

• Q. Can a 10-20 bps improvement in other income and marginal credit cost improvement really bridge the 40 bps ROA gap?

  CFO: The 40 bps gap is roughly 30 bps from NIM pressure (earlier expected improvement now not materialising) and 10 bps from opex. Other income and credit cost alone will not fully offset; NIM expansion is the missing piece.

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