Bandhan Bank Shares Plunge 17% As Guidance Cut Triggers Broker Downgrades

Shares of Bandhan Bank tumbled nearly 17% on Wednesday after the private sector lender cut its return on assets (RoA) guidance and warned of continued pressure on margins, overshadowing its stronger-than-expected June-quarter earnings.

The stock fell as much as 19% to an intraday low of ₹169.56 before recovering some losses to settle 16.92% lower at ₹173.50 on the NSE, compared with its previous close of ₹208.83.

Investor sentiment turned sharply negative after the bank's management, during its post-earnings conference call, lowered its exit RoA guidance to 1.2%-1.4% from the earlier 1.6%-1.8%. The lender also said net interest margins are expected to remain under pressure due to elevated deposit costs.

Management highlighted higher deposit pricing, an uncertain global environment, monsoon-related risks and rising technology costs as key challenges for the business.

Motilal Oswal Downgrades To 'Hold'

Following the guidance cut, Motilal Oswal Financial Services downgraded Bandhan Bank to 'Hold' from 'Buy', while maintaining its target price at ₹225 per share.

The brokerage reduced its FY27 and FY28 earnings estimates by 14% and 6%, respectively, and now expects the lender to deliver RoA of 1% in FY27 and 1.4% in FY28.

According to Motilal Oswal, the revised guidance indicates a slower earnings trajectory despite the bank's healthy quarterly performance.

JPMorgan Flags Further Downside

JPMorgan maintained its 'Neutral' rating on the stock with a target price of ₹175.

The brokerage said the management's sharp reduction in RoA and growth guidance was the key takeaway from the earnings call.

It also noted that Bandhan Bank has lowered its loan growth expectations to the lower end of its 14%-15% guidance range, citing a deliberate moderation in lending due to rising asset quality risks linked to higher energy costs, supply chain disruptions and uncertainty surrounding the monsoon.

Nomura also retained its 'Neutral' recommendation with a target price of ₹190.

The brokerage highlighted that Bandhan Bank raised its average savings account rate and peak term deposit rates by 20 basis points each toward the end of the June quarter amid intense competition for deposits.

Nomura expects the higher funding costs to flow through over the coming quarters and has reduced its FY27-FY28 earnings per share estimates by 4%-7%. It also lowered its net interest margin assumptions by 18-24 basis points, although it trimmed its credit cost estimates to 1.8% from 2% earlier.

CLSA, Jefferies See Valuation Support

Unlike some peers, CLSA maintained its 'Outperform' rating on Bandhan Bank with a target price of ₹235.

The brokerage said the reduction in RoA guidance could unsettle investors in the near term, but noted that its own FY28 RoA estimate of 1.3% was already below the bank's previous guidance, limiting the impact on its valuation assumptions.

Jefferies also remained relatively constructive, saying Bandhan Bank's valuation of around 1.2 times FY27 adjusted price-to-book provides downside support.

The brokerage reduced its earnings estimates by more than 10% but said the bank could benefit from higher FCNR(B) deposit inflows over time.

According to analyst consensus, 26 brokerages currently cover Bandhan Bank, with 15 recommending 'Buy', seven maintaining 'Hold' ratings and four recommending 'Sell', reflecting a mixed outlook following the lender's revised guidance.