Bandhan Bank’s first quarter results had a lot to cheer about, but the stock hardly showed any enthusiasm on Wednesday. True, the lender’s net profit at 550 crore missed Street estimates by a wide margin. That is because the bank chose to provide 750 crore towards covid-19-related risks over and above its regular provisioning.

It had set aside 690 crore as provisions for covid in the previous quarter as well. This shows that Bandhan Bank is cautious on the asset quality front. This caution comes even as the bank’s collection efficiencies surged as the government lifted restrictions across the country.

Graphic: Satish Kumar/Mint

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Graphic: Satish Kumar/Mint

Collections rose from 29% in April to 76% in value terms by the end of June. In essence, the lender is getting its money back on time. What it also means is that a large number of borrowers are not opting for the moratorium.

Chandra Shekhar Ghosh, managing director and chief executive officer of Bandhan Bank, said collection efficiency would be back to levels seen before the pandemic by September. “Our collection efficiency has not been impacted more by lockdown but more by the natural disasters like floods in Assam and Bihar and Amphan in West Bengal,” he said in a telephonic interview. Ghosh said localised lockdowns were easier to deal with than a nationwide restriction. “We are able to navigate localised lockdowns, but the national lockdown was a very difficult period.”

Even so, there is an underlying caution that Ghosh has both in terms of provisions and disbursements. While disbursements showed 17% growth, Ghosh said the bank has been selective. More than 40% of its borrowers derive income from agriculture and allied activities. Another 30% are small shops and businesses that are largely localized in the east and north-east India. Ergo, the impact of a nationwide lockdown or even lockdowns in other states have not impacted Bandhan Bank’s loan book much.

What this means is that the lender’s asset quality outlook and even growth is better than its peers.

That said, the provisioning shows a wariness that the lender has. Investors, too, should wait for more clarity in the coming quarters.

It also means that a large number of borrowers are not opting for moratorium. Chandra Shekhar Ghosh, managing director and chief executive officer of the bank believes that by September collection efficiency would be back to levels seen before the pandemic. “Our collection efficiency has not been impacted more by lockdown but more by the natural disasters like floods in Assam and Bihar and Amphan in West Bengal,” he told Mint in a telephonic interview. Ghosh believes that localised lockdowns are easier to handle than a nationwide restriction. “Localised lockdowns, we are able to navigate. The national lockdown was a very difficult period,” he said.

Even so, there is an underlying caution that Ghosh is keeping both in terms of provisions and disbursements. While disbursements showed a reasonable 17% growth, Ghosh said the bank has been selective.

More than 40% of Bandhan Bank’s borrowers derive income from agriculture and allied activities. Another 30% are small shops and businesses that are largely localised in the eastern and north eastern states where they operate. Ergo, the impact of a national lockdown or even lockdowns in other states does not impact Bandhan Bank’s loan book much.

What this means is that the lender’s asset quality outlook and even growth is better than its peers. That said, the provisioning shows a wariness that the lender has. Investors too should wait for more clarity in the coming quarters.

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