Bandhan Bank’s Stock Performance and Management Transition Draw Investor Attention

Bandhan Bank Ltd experienced a muted reaction in its stock price following the release of its business update for the second quarter of the financial year 2025 (Q2FY25). Despite a notable growth trajectory, the financial market’s cautious outlook appears linked to uncertainties surrounding a management transition.

Since July, Bandhan Bank has seen Ratan Kumar Kesh serve as its interim CEO, succeeding Chandra Shekhar Ghosh. However, Kesh’s tenure has only been extended by a month, raising questions about the continuity of leadership at the bank. Observers are watching closely for any announcements concerning Kesh’s longer-term appointment, as his involvement with the bank spans nearly two years.

The bank reported an impressive 21% year-on-year growth in advances, including off-book pass-through certificates, reaching ₹1.3 trillion in Q2FY25. Moreover, deposits surged by 27% year-on-year to ₹1.4 trillion. The loan-to-deposit ratio stands at 92%, indicating a balanced approach without immediate pressure on deposit outflows or asset reduction.

In the broader banking ecosystem, liquidity coverage ratio (LCR) compliance remains a challenge, with most banks’ LCR expected to fall within 117-122% against the mandated 100%. Bandhan Bank, however, maintains a robust LCR of 162%, significantly higher than many peers, showcasing its strong liquidity position.

Nonetheless, despite Bandhan Bank’s healthy deposit growth, there is a shift in its deposit structure. Bulk deposits increased by 58% year-on-year, while retail deposits rose only by 16%. A recent Reserve Bank of India (RBI) circular redefined bulk deposits as single deposits exceeding ₹3 crore, making these costlier yet more volatile than retail deposits. Consequently, the bank’s retail deposits have decreased from 78% in Q1FY23 to 68% of total deposits in Q2FY25.

There was a slight decline in the bank’s overall collection efficiency, excluding non-performing assets (NPA), to 98.2% in Q2FY25 from 98.7% in the previous quarter. This decline is attributed to lower collection efficiency in the emerging enterprise business, which accounted for 67% of the bank’s gross non-performing assets as of June.

Despite these challenges, Bandhan Bank’s valuation remains undemanding, stand at approximately 1x of FY26 book value according to Bloomberg consensus estimates. The bank’s key to enhancing stock performance lies in improved asset quality and clearer direction concerning the CEO’s tenure.