Bandhan Bank Ltd. (BANH.BO): 2QFY27: MFI stabilizing but structural challenges persist; Neutral

Bandhan Bank's 2QFY27 PAT of Rs6.2bn was 25% above GSe / 3% above Visible Alpha consensus. The surprise was led by core fee income (15% ahead of GSe) and operating costs (8% lower than GSe), more than offsetting higher than expected credit cost (187 bps vs. GSe of 173 bps). NII was broadly in-line while margins missed estimates (6.1% vs. GSe of 6.2%). Asset quality remained broadly stable, with lower net slippages QoQ (adj. for ARC recovery in 1QFY27) while overall credit cost was steady at 1.9%. Management reiterated its RoA guidance of 1.2-1.4% by exit-FY27 and remained constructive on MFI growth recovery and asset quality. We raise earnings by 3% for FY27E and keep FY28E/FY29E largely unchanged. Our price target remains unchanged as better fee/cost progression (reflected in higher sustainable RoE) is offset by higher risk-free rates as well as a higher one-time ECL impact. We maintain Neutral with a 12m target price of Rs180 based on 0.9x 12m fwd P/B.