The share price of Bandhan Bank has given a return of over 10% in the last one month, but are these gains sustainable? Though the net profit in Q4FY25 jumped 5x, there are questions about the slippages in the core vulnerabilities of the bank. The Q4 net interest income and margin have declined significantly. Let’s dig a bit deeper into these points.
Bandhan Bank’s net interest income
The private lender in its Q4FY25 reported that the net interest income declined to Rs 2,756 crore, compared to Rs 2,859 crore in Q4FY24. Even if we compare it with the previous quarter of FY25, it has fallen by 2.6% from Rs 2,830 crore.
To explain to you, the net interest income is one of the key profitability measures for a bank. If to go with the definition, then NII is the difference between the revenue earned from the interest-gaining assets and the expenses incurred while paying the interest on liabilities. In short, interest earned on loans minus interest paid on deposits.
Coming back to the falling NII of Bandhan Bank, in Q2FY25, it stood at Rs 2,948 crore and in Q1FY25 at Rs 3,005 crore.
Surely, the bank’s NII has been falling over the quarters despite a jump in net profit this quarter. This indicates that the bank’s core operation is not the main reason behind the jump in the net profit. “Core non-interest income stayed flat YoY. Bandhan earned one-off income of Rs 540 crore towards CGFMU claims recovery and Rs 52 crore from the Assam government, totalling to Rs 592 crore in Q3, while there was no one-off in Q4,” said Nuvama Institutional in a research note.
| Time Period (FY25) | Net interest income (Cr.) |
| Q4 | 2,756 |
| Q3 | 2,830 |
| Q2 | 2,948 |
| Q1 | 3,005 |
Bandhan Bank’s net interest margin
The bank’s net interest margin for Q4FY25 stood at 6.7%, 96 basis points lower than 7.6% reported in Q4FY24. NIM fell 20 bps quarter-on-quarter due to higher slippage and a higher share of secured loans, said Nuvama. In Q3FY25, the bank’s net interest margin stood at 6.9%, in Q2 at 7.4%, and in Q1 at 7.6%.
First things first, defining NIM, it’s the financial ratio that tells how effectively a bank has deployed its funds to generate interest income. It is expressed in percentage terms.
“Given that the secured loans are likely to grow faster than EEB (Emerging Entrepreneurs Business, which includes microfinance) loans, normalised NIM would be lower (in future),” added Nuvama.
| Time Period (FY25) | Net interest margin (%) |
| Q4 | 6.7 |
| Q3 | 6.9 |
| Q2 | 7.4 |
| Q1 | 7.6 |
Bandhan Bank’s microfinance business in soup
The bank’s EEB slippage rose 13% QoQ to 8.7% of EEB loans. EEB stress stays elevated, though it has a very small 1% exposure to Karnataka, said Nuvama. The whole bank’s slippage rose 8% sequentially and was 5.6% of lagged loans, with EEB forming 81% of total versus 76% QoQ. EEB gross non-performing loans, including write-off, rose 9% QoQ. Collection efficiency for EEB in Q4FY25 at 97.8% was higher than 97.4% QoQ.