Bandhan Bank Shares Plunge Over 10% Despite 35% Jump in Q1 Profit as Investors Worry Over Outlook

Bandhan Bank Ltd shares fell more than 10 per cent on Tuesday even though the private lender reported a net profit of 35 per cent year-on-year growth in the second quarter. Investor anxiety about the bank’s future profitability is evident even as it gained market share in several of its core performance indicators.

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The bank reported a standalone net profit of ₹500 crore in the first quarter of FY27 (up from ₹372 crore in the same quarter last year). The increase in earnings is largely due to a reduction in provisions for bad loans, which helped the bottom line.

Q1 FY27 results: Net Profit: ₹502 crore (up 35% YoY), Net Interest Income: ₹2,921 crore (up 6% YoY), Net Interest Margin: 6.2% (unchanged sequentially), Gross NPA: 3.15% (improved from 3.27%), Net NPA: 0.93% (improved from 0.97%), Provisions: reduced to ₹683 crore from ₹1,147 crore a year ago.

The decline in provisions helped with profitability, and asset quality also improved in the quarter.

Why did stocks fall?

Despite the good quarterly numbers, it was the bank's guarded outlook for the future.

Bandhan Bank maintained its credit cost guidance at 1.6%–1.8%, but lowered its FY27 exit Return on Assets (RoA) guidance by 40 basis points to 1.2%–1.4%.

The revised profitability guidance disappointed investors, who had expected a stronger recovery given asset quality and earnings.

Management's Outlook

In the next quarters, funding costs are expected to rise, the bank said, because of higher deposit costs.

Management expects:

Emerging Entrepreneurs Business (EEB) loan growth of 5%-10%, Non-EEB loan growth of more than 20%, Net Interest Margin (NIM) to remain around 6.2%.

We can see that the guidance reflects confidence in business growth, but market sentiment was affected by the potential for higher funding costs and lower profits.

Mixed Views from Brokerages

Following the results, firms in the brokerage sector are still divided on Bandhan Bank's prospects.

Some analysts appreciated the improvement in asset quality, lower provisioning requirements, and steady core income, viewing them as signs that the bank’s balance sheet is strengthening.

Others have expressed caution over the lower RoA guidance and the rising cost of funds, suggesting that profitability may continue to be under pressure even with operational gains.

Asset Quality Continues to Improve

One of the positive things in the June quarter was the continued improvement in asset quality.

The Gross Non-Performing Asset (GNPA) ratio decreased to 3.15%, and the Net NPA ratio improved to 0.93%, revealing better recovery and collection efficiency.

The significant reduction in provisions also suggests that stress in the loan book may be easing, but investors will closely monitor whether this trend continues in future quarters.

What Investors Should Watch

In the near future, market players will focus on how Bandhan Bank will perform:

• Loan growth in retail and MSME sectors,
• profitability improvement despite increased funding costs,
• continued reductions in NPAs,
• deposit growth and liquidity position,
• management's ability to meet its FY27 financial goals.

The latest quarter results reflected healthy earnings growth and improving asset quality, but the market reaction shows investors are more interested in what is ahead and not in past performance. Bandhan Bank does need to be profitable and maintain good asset quality in the next couple of quarters to be able to deliver consistently profitable growth.