Bandhan Bank Ltd (BANDHANBNK) Q1 FY27 Earnings Call: Cuts ROA Guidance by 40 bps, Non-EEB Portfolio Expands 27% YoY

Bandhan Bank Ltd held its Q1 FY27 earnings call on July 21, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Steady Margins, 35% PAT Growth Amid Portfolio Diversification

• Net total income of Rs.3,524 Cr — Q1 FY 2026-2027 revenue supported by stable NIM of 6.2% and a 22% YoY rise in adjusted non-interest income. Third-party distribution income surged 47% YoY.
• PAT grew 35% YoY to Rs.502 Cr — Q1 FY 2026-2027 profit driven by moderating credit costs (1.8% vs 2.0% in Q4 FY26) and strong operating leverage, partially offset by a 19% YoY rise in operating expenses (incl. Rs.61 Cr gratuity provision).
• Gross advances reached Rs.1.56 Lakh Cr — Q1 FY 2026-2027 growth of 16% YoY, led by non-EEB segments which expanded 27% YoY and now form two-thirds of the book. Secured portfolio rose to 57% of total advances.
• Deposits grew 7% YoY to Rs.1.65 Lakh Cr — Retail deposits (CASA + retail term) grew 16% YoY, while bulk deposits declined 13% YoY to 26% of total. CASA ratio improved sequentially to 29.4%.
• Asset quality metrics improved — Gross NPA at 3.1%, Net NPA at 0.9%. Provision coverage ratio (incl. technical write-offs) at 86%. Capital adequacy ratio strengthened to 18.2% (Tier 1: 17.5%).

FY27 ROA Target Revised Down 40 bps on NIM and Opex Stretch

• FY 2026-2027 ROA guidance cut by 40 bps — Management now expects an exit ROA of 1.0% to 1.4% for Q4 FY 2026-2027, down from the original target of 1.6% to 1.8% set in Dec 2024. The medium-term aspiration of 1.6%+ ROA is reaffirmed.
• ~30 bps NIM stretch — Driven by elevated funding costs from a structural liquidity deficit (~Rs.1T vs required Rs.2.5T) and a shift in Indian household savings patterns. NIM guidance was revised from targeting 6.5% by Q4 FY 2026-2027 to maintaining current levels (~6.2%).
• ~10 bps opex stretch — Technology costs surged 65% YoY (multinational vendor inflation, chip prices, energy costs). Opex-to-asset ratio rose to 4.3% vs the planned 4.0%. Management targets 4.2% for the full year.
• External risks cited — Management attributed the revision to the "Middle East geopolitical developments" (West Asia energy crisis), unpredictable monsoon, elevated funding costs, and supply-chain-related technology expenditure increases which disproportionately impact the microfinance sector.
• Credit cost guidance maintained — FY 2026-2027 credit cost guidance remains unchanged at 1.6% to 1.8%. Q1 FY27 actuals came in at 1.8%, with management expressing confidence in further improvement as slippages plateau.

Non-EEB Drives Expansion, EB Growth Calibrated to 5-10%

• Full-year FY 2026-2027 credit growth guided at 14% — Non-EEB segment targeted at 20%+ growth, while the EEB (microfinance) segment is guided at 5-10%. Q1 FY27 actuals saw non-EEB grow 27% and EEB remain flat.
• Target loan mix maintained — Management aims for 35% in EB and 65% in non-EB segments for FY 2026-2027, with a secured/unsecured split of 60:40. The secured mix strategy is intended to reduce volatility from MFI.
• Wholesale banking grew 38% YoY — Prioritized to generate other income (fee, forex, trade finance) and capture wallet share, despite lower NIM. The corporate book yield is described as "comparable to industry average."
• Retail assets up 45% YoY — Driven by CV, CE, auto, and gold loans. Gold loan sourcing was impacted by the new RBI circular in early Q1 (a "180 degree change") but returned to normal from mid-May, achieving double-digit growth vs single-digit in Q1 FY26.
• Mortgage book growth affected — Teething problems from a complete vertical restructuring temporarily slowed mortgage growth. Retail growth (ex-overdrafts) was 5% QoQ due to a cautious macro stance.

Slippages Plateau, Recoveries Improve, SMA Spike Arrested

• Gross slippages at Rs.1,079 Cr in Q1 FY27 — Broadly stable sequentially. EB portfolio slippages improved to Rs.604 Cr from Rs.690 Cr in Q4 FY 2025-2026. Non-EB slippages accounted for the remainder.
• Collection efficiency recovered to 99% in May-June — Overall collection efficiency (ex-NPA) stood at 98.9% in June 2026. EB collection efficiency was 98.5%, comparable to 98.6% in March 2026.
• SMA 0 spike in April arrested — Early delinquency (0-90 DPD) rose to 3.5% from 3.1% in Q4 FY26 due to West Bengal elections and holiday Wednesdays. Forward slippage to SMA 1 was contained, and vintage charts show improvement in newer vintages.
• Proactive ARC sale yields Rs.120 Cr cash recovery — The bank sold Rs.291 Cr of housing NPA loans to an ARC during the quarter, resulting in a cash recovery of Rs.120 Cr. Recoveries and upgrades in Q1 were better than most quarters of FY 2025-2026.
• Credit cost expected to continue improving — Management expects credit cost to moderate further through FY 2026-2027 as slippages plateau and recoveries sustain. EB credit cost fell to 3.3% in Q1, close to the guided range.

Tech Investments Pressure Opex; Efficiency Gains Seen from FY28

• Tech costs now 9.5% of total opex — Up from 6% over the past two years, driven by regulatory tools, multinational vendor pricing, and external factors (chip prices, energy costs). Management aims to keep it within the 10% industry benchmark and gradually reduce to 8%.
• Cost-to-income ratio to remain elevated in FY27 — Management expects it to taper down over the next 2-3 years. IT investment benefits (LOS, CRM) are expected to materialize as productivity gains only after ~18 months, i.e., around FY 2027-2028.
• Reducing DSA dependency — Management is activating its branch network to reduce high-cost DSA sourcing. Monthly sourcing from branches grew from Rs.200 Cr to Rs.900 Cr over the last quarter.
• Cost of funds remains under pressure — A structural liquidity deficit (~Rs.1 Trillion vs required Rs.2.5 Trillion) and competition from larger stable banks raising FD rates limit the benefit from prior repo rate cuts. The benefit of repo rate reductions will not be available from Q2 FY 2026-2027 onwards.
• One-time gratuity provision of Rs.61 Cr — Booked in Q1 FY 2026-2027 due to a new wage act. This contributed to the 19% YoY rise in operating expenses. No other one-off items were recorded in NII or other income.

Cautious Optimism on Growth; NIM and Opex Headwinds Persist

• FY 2026-2027 credit growth guided at 14% — Driven by non-EEB growing 20%+. EB growth is calibrated to 5-10% depending on the external environment; management will contain growth if conditions do not improve.
• ROA exit target of 1.0-1.4% for Q4 FY27 — Improvement expected from 10-20 bps upside in other income and further marginal improvement in credit costs. The medium-term aspiration of 1.6%+ ROA remains intact.
• NIM focus shifts to stability — Holding Q1 FY27 NIM levels of 6.2% is considered a "great achievement" given headwinds. The previous target of 6.5% NIM by Q4 FY27 has been deferred.
• Efficiency gains expected beyond FY28 — Current tech investments (LOS, CRM) are expected to yield productivity benefits only after ~18 months (FY 2027-2028). The pace of IT cost growth may "taper down slowly" after that point.
• Credit cost guidance maintained at 1.6-1.8% — Management expects recoveries to sustain or improve through FY 2026-2027, and credit costs to continue improving as slippages plateau and the vintage profile strengthens.