Bandhan Bank, BOB, AU SFB, Bajaj Finance: What stock analysts say post Q1 updates

Brokerages Nomura India and MOFSL came out with short notes on a handful of banking and financial institutions following their June quarter business updates. Here’s what the two brokerages said on business prospects and the outlook on stocks. 

Bank of Baroda: Nomura said the growth trends in both loans and deposits in Q1 were weak. These, coupled with contraction in margins and seasonally soft fee income, are expected to result in a weak core PPOP in the June quarter. However, strong treasury income, led by a 26 bps QoQ decline in G-sec (10-year) yield, should provide some cushion to overall profitability. It maintained ‘Neutral’ on Bandhan Bank with a target of Rs 235.

AU Small Finance Bank: MOFSL said AU SFB reported a healthy 2.6 per cent QoQ (23.1 per cent YoY) growth in gross advances. Including the securitized/assigned and IBPC loan portfolio, the total loan portfolio grew 1.7 per cent QoQ (17.9 per cent YoY). It found deposit growth too healthy at 2.8 per cent QoQ (31.3 per cent YoY).

“Overall, business growth stood healthy, and inline with our estimates. CASA as well as deposits growth continued to grow at a steady level, despite a higher base in 4QFY25 (10.7 per centYoY on deposits in 4QFY25). Overall CD ratio remained largely unchanged at 87.4 per cent (gross level),” MOFSL said while suggesting a ‘Buy’ on the stock

Bandhan Bank: Nomura India said the sequential decline in loans was largely led by de-growth in their MFI book (41 per cent of their overall loans as of FY25). It expects margins in Q1 to have declined led by changes in loan mix, repo rate cuts and a decline in CASA deposits. Furthermore, i expects soft fee income growth and elevated credit costs to keep the bank’s returns profile muted in Q1. It maintained ‘Neutral’ with target of Rs 165 on the stock. 

Bajaj Finance: MOFSL said total customer franchise stood at 10.65 crore, up 21 per cent YoY. New customer acquisition stood at 47 lakh, up 5 per cent YoY from 45 lakh in 1QFY25. New loans booked rose 23 per cent YoY, which is in line with the recent trends. 

“Deposit growth was weak at 15 per cent YoY/1 per cent QoQ to Rs 72,100 crore, potentially because the company de-prioritized deposit growth and instead preferred to borrow from banks, which give floating loans,” it said while suggesting a ‘Neutral’ rating on the Bajaj Finance stock.

L&T Finance: MOFSL said Q1 retail disbursements grew 9 per cent YoY, but rural business disbursements declined 3 per cent YoY. Farmer Finance disbursements grew 16 per cent YoY, Urban Finance disbursements 13 per cent YoY and SME disbursements grew 30 per cent YoY. Retail loan mix increased to 98 per cent. This implies that the wholesale book could have declined to Rs 2,000 crore. The brokerage retained ‘Buy’ on the stock.