India’s Bandhan Bank quarterly profit slumps on higher bad loan provisions

Indian private lender Bandhan Bank reported a steeper-than-expected 65% drop in first-quarter profit on Friday, hit by a spike in bad loan provisions as its asset quality worsened.

Profit for the quarter ended June fell to 3.72 billion rupees ($43.2 million), from 10.63 billion rupees a year ago. Analysts had expected it to log a profit of 3.83 billion rupees, according to data compiled by LSEG.

Bandhan Bank, which transitioned from a microfinance lender to a universal bank in 2015, has grappled with higher bad loans in its micro-loan book over the last few quarters, forcing it to set aside more funds for potential bad loans.

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Provisions and contingencies in the quarter jumped to 11.47 billion rupees from 5.23 billion rupees in the same quarter a year ago. They were, however, lower than the 12.6 billion rupees in the prior quarter.

Gross bad loans as a percentage of total loans, a measure of asset quality, rose to 4.96% in the quarter from 4.71% in the prior quarter. Fresh slippages, or bad loan additions, were at 15.5 billion rupees, sharply higher than 8.9 billion rupees in the year ago quarter.

The lender’s net interest income dropped 8%, while the net interest margin contracted 117 basis points year-on-year to 6.4%.