Bandhan Bank surges 6% despite 52% profit drop; brokerages split on outlook

Bandhan Bank's stock climbed nearly six percent on Friday, a move that caught some observers off guard given the lender had just reported a staggering fifty-two percent collapse in quarterly profit. The shares rose to Rs 151.70 during the session—the strongest single-day performance since April 2025—before settling at Rs 150.95, up 5.82% from the previous close of Rs 142.65.

The paradox at the heart of this move reveals something about how markets price recovery. Yes, Bandhan Bank's net profit for the third quarter fell to Rs 205.59 crore, a sharp decline year-over-year. But the operating profit—the money the bank actually made from its core business—grew ten percent quarter-on-quarter to Rs 1,450 crore, exceeding what analysts had forecast. Margins expanded by ten basis points, and the bank pulled in higher income from sources beyond its lending operations. For investors watching the bank's trajectory, these numbers suggested the worst might be behind it.

The real story, though, sits in the bank's balance sheet. Bandhan had been carrying a heavy load of stressed assets—loans that borrowers were struggling to repay. In a significant housecleaning, the bank sold Rs 6,870 crore worth of this troubled portfolio to an asset reconstruction company, a financial firm that specializes in recovering value from bad debt. The effect was immediate and visible: the gross non-performing assets ratio, which measures the percentage of loans in trouble, dropped sharply to 3.3% from nearly 5%. That kind of improvement matters because it signals the bank is moving past a period of deteriorating credit quality.

Wall Street's response split along familiar lines, though the weight of opinion tilted toward optimism. JM Financial, which had previously recommended selling the stock, reversed course and upgraded it to 'Add,' setting a target price of Rs 160. The firm acknowledged that profit had missed expectations due to elevated credit costs running at 3.4%, but argued the valuation had become attractive enough to offset that concern. The bank's price-to-book ratio—a measure of what investors are willing to pay relative to the bank's net assets—stood at just 0.7x for the fiscal year 2028, suggesting the market had priced in significant pessimism.

Axis Securities made a similar move, upgrading from 'Hold' to 'Buy' with an identical Rs 160 target. The brokerage pointed to what it called 'green shoots' in the emerging entrepreneurs business segment, the part of the bank focused on lending to small business owners. Early warning signs of future defaults were improving in that division, suggesting the worst of the credit stress cycle might be passing. Management, the bank's leadership, had signaled they expected credit costs to improve meaningfully in the fourth quarter.

Not everyone agreed. Nuvama maintained a 'Reduce' recommendation, cutting its target price to Rs 133 from Rs 155, suggesting the stock still had room to fall. Meanwhile, MOFSL stuck with a 'Buy' rating and an unchanged target of Rs 175, betting on a stronger recovery than the more cautious voices anticipated.

What unfolded on Friday was a market making a bet on the future. The profit collapse was real and recent. But the improving asset quality, the margin expansion, and the sense that the bank had finally begun to clean up its balance sheet created an opening for investors to look past the immediate pain toward what might come next. Whether that optimism proves justified will depend on whether the fourth quarter delivers the credit cost improvement management promised.