Bank has started collections in non- containment zones-Bandhan Bank

Update on the Indian Equity Market:

On Monday, Nifty closed 0.3%higher at 10,167. Among the sectoral indices, IT(+1.8%), PVT Bank (+1.3%), Bank (+0.7%)closed higher, whereas Media (-1.7%), PHARMA (-1.4%) and PSU Bank (-1.2%) closed lower. Among the stocks GAIL (+7.5%), IndusInd Bank (+7.3%),and BPCL (+7.0%) closed on a positive note.ZEEL (-4.5%), ShreeCement (-3.9%) and Eicher Motor (-3.4%) were among the top losers.

Excerpts from an interview of Mr.Chandra Shekhar Ghosh, CEO, Bandhan Bankwith Mint dated  8^thJune 2020:

• The pandemic has brought in a whole new set of risks for banks which are both internal and external.
• The bank is asking its customers to use more digital modes of transaction in the changed scenario.
• Branches were operational throughout the lockdown by observing government and administration rules.For Bandhan Bank, there were not many people working remotely.
• He said some things can be done virtually. Earlier all regional managers were mandated to come to the head office for meetings but now the bank is doing it virtually and it is working.These efforts are saving expenses on travel.
• Every sector cannot work from home and in banking some jobs might be possible but not all.
• For Bandhan Bank, there is not a greater degree of acceptability to work – from- home.There are a lot of security issues related to bankers working remotely and that includes possible violations of agreements with customers, bound by data-security clauses.
• The bank will have to take a deeper look into how these risks could be mitigated and only then banks will be able to move towards a work-from-home model.
• On recoveries, he saidcollections have just started and at the ground level, the borrowers, especially in micro-credit involved in livelihood projects and agriculture, are continuing their businesses. Due to lockdown the bank is not being able to reach them.
• The bank has started collections in the non-containment zone. However, the problem is that collection executives are facing difficulties in collecting loans from villages, as local residents are not allowing outsiders to access those places, citing covid-19 risks.
• Speaking about post covid-19 opportunities, he said secured credit is the area where there are big opportunities.
• There are customers who have been regularly paying all equated monthly installments (EMIs) and are eligible for more funds. These are small businesses which are running despite the lockdown.
• When the rural demand recovers, pick-up in two-wheelers and other vehicles popularly used in these areas will see demand, and so will bank loans in these segments. Demand for gold loans is also coming quite strong.

Consensus Estimate: (Source: market screener and Investing.com websites)

• The closing price of Bandhan Bankwas ₹ 264/- as of 8-June-2020.  It traded at 2.4x/ 2.0x theconsensus book value estimate of ₹ 107/127for FY21E/ FY22E respectively.
• The consensus average target price for Bandhan Bank is ₹284/- which implies a PB multiple of 2.2x on FY22E BV of ₹127/-.

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