Bandhan Bank has decided to stay away from big-ticket corporate lending and would remain happy with its micro loans to small and micro enterprises and housing loans after suffering its biggest non performing asset hit from its exposure to IL&FS.
The bank has fully written off its exposure to IL&FS in the December quarter.
"Provision of Rs 384.95 crore made in respect of an exposure to a borrower from infrastructure development and finance sector, which was classified as non-performing asset and fully provided for during the quarter," Bandhan Bank said in a post earnings release on Thursday.
"We used to always take unsecured exposures. This was an experiment on a secured lending to a AAA borrower which has gone bad," managing director and chief executive Chandra Shekhar Ghosh said during a media interaction.
We had tested waters with one large corporate account. But that failed. We will not repeat this," he said.
The provisioning pushed up gross non performing asset ratio to 2.4% as on December end from 1.29% at September end though net bad asset ratio remained stable at 0.7% against 0.69% in the previous quarter.
Bandhan's core business of micro lending performed well as usual.
Despite higher provisioning, net profit rose 10.4% on year to Rs 331.3 crore in December quarter while net interest income went up sharply to 53.6% on year to Rs 1,124 crore.
Net interest margin, the measure of core profitability, (NIM) for the December quarter stood at 10.3% from 9.9% in the corresponding quarter of the previous year.
Earlier this week, Bandhan Bank inked a deal to acquire HDFC Ltd-promoted affordable housing finance firm Gruh Finance.
The share exchange ratio -- 568 equity shares of face value of Rs 10 each of Bandhan Bank to be issued for every 1,000 equity shares of face value of Rs 2 each of housing finance company -- was seen as negative for both the entities and both the scripts witnessed heavy selling post merger announcement though shares of Bandhan rose as much as 4.2% after the earnings were announced before closing with a day's gain of 3.82%.
Post merger, Bandhan's dependence on micro loans would come down from 86% to 58%, while its bank's presence in western states, including Maharashtra, would double to 193 branches against 94 earlier, Bandhan said in a presentation.
EXPANDING FOOTPRINT
- 53.6% – on-year rise in net interest income in Q3 to Rs 1,124 crore
- 10.3% – Net interest margin, for Q3, up over 9.9% a year ago
- 58% – drop in Bandhan's dependence on micro loans from 86% after Gruh merger
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The provisioning pushed up gross non performing asset ratio to 2.4% as on December end from 1.29% at September end though net bad asset ratio remained stable at 0.7% against 0.69% in the previous quarter.
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