Bandhan Bank on Saturday reported an 80 per cent dip in its March quarter net profit at Rs 103 crore, as it wrote off a huge portfolio of loans in the flagship microlending business by recognising stress upfront. The bank’s post-tax profit for FY21 also reduced by 27.1 per cent to Rs 2,205 crore as a result of the hit to the business in the last quarter.
Its managing director and chief executive C S Ghosh said the bank wrote off Rs 1,929 crore of loans, a bulk of them in the microfinance segment, in the March quarter because it wanted to start the new fiscal with a clean balance sheet.
As a result of the accelerated write-off, the bank’s overall provisions shot up to Rs 1,594 crore from the year-ago period’s Rs 827 crore, which had a direct impact on the profit line. Operating profit, which is arrived at by excluding the provisions, was up 13 per cent to Rs 1,729 crore.
Its chief financial officer Sunil Samdhani said performance of the last 3-6 months was assessed before taking a call on the write-offs, and added that most of these accounts are contact-based businesses like beauty parlour, gym, school bus owner.
The bnak had restructured less than Rs 200 crore of advances in the year-ago period, and most of the loans which were written-off in the reporting quarter were microloans, he said.
Additionally, Bandhan Bank also restructured over Rs 600 crore of advances, which were majorly from the home loan book, he said, adding that with such accounts, it has got greater possibility of an account normalizing if its defers the repayments.
The gross non performing assets ratio improved to 6.8 per cent as against 7.1 per cent in December, including the proforma NPAs.
If one were to include the impact of the write-offs and NPAs, the overall repayments for the bank stand at over 98 per cent, Ghosh said, pointing out that the troubles in two key markets of West Bengal and Assam, arising due to factors like the state elections, a local law in Assam and the second wave of the pandemic, have subsided, with both the states showing collection performance at over 90 per cent.
Ghosh said that Bandhan Bank will suffer some reductions in repayments over the next two months because of the second wave induced localised lockdowns in many states.
Samdhani, however, said that the reverses on the overall economic climate front will not impact its loan growth in FY22 because advances growth mostly happens in the second half of a fiscal starting October every year. The bank, which posted a 27 per cent rise in advances for FY21, did not share an advances growth target.
The core net interest income rose by only 4.6 per cent during the reporting quarter to Rs 1,757 crore despite the advances growth. Restricting the growth was a Rs 538 crore interest reversal on recognitions made in the past on assets which turned NPAs after the Supreme Court order on asset classification, which also reduced the net interest margins by 1 percentage point to 7.8 per cent.
The non-interest income grew 57.4 per cent to Rs 787.3 crore during the quarter.
From a business growth perspective, de-risking has been prime on the agenda with limited network expansion in West Bengal and Assam, Ghosh said.
The bank has turned 11 of its training centres into COVID-care facilities to accommodate 700 beds and is also donating 500 oxygen concentrators, he said.
The overall capital adequacy ratio of the bank stood at a healthy 23.5 per cent, and was down when compared with the 27.2 per cent in the year-ago period.
The bank scrip had gained 0.80 per cent to close at Rs 297 a piece on Friday’s trade on the BSE, as against gains of 0.52 per cent on the benchmark.
Total deposit grew 28% y-o-y at Rs 77,336 crore, while it witnessed a de-growth of 1% q-o-q from Rs 77, 972 crore in January-March.
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