This Bank Stock Has Slumped 24% In 6 Months, But Analysts See A 51% Rally Ahead

Shares of Bandhan Bank have remained under pressure for quite some time. In the last six months, the stock has given up over 24%. However, analysts at Kotak Securities think that the lender can change things around.

The Bandhan Bank Analyst: Analysts at Kotak Securities maintained the “buy” rating for the stock with a price target of ₹270. The target indicates an around 51% upside from the stock’s last closing price of ₹178.70.

The Bandhan Bank Thesis: The analysts pointed out that the transition to the new core banking system marks a significant milestone, providing the bank with enhanced flexibility in understanding its business and developing new products. With this, the bank is well-positioned to leverage its strong customer base for scalability, the analysts added.

The brokerage also expects lower slippages compared to historical trends. Moreover, as per the domestic brokerage firm, the private lender is positioned as one of the most inexpensive stocks in its segment.

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The analysts forecast that the bank is poised to achieve a return on equity (RoE) of approximately 15-17% with a compound annual growth rate (CAGR) in earnings per share (EPS) exceeding 15%, primarily driven by a reduction in credit costs.

Additionally, the bank has bolstered its risk management capabilities, enabling better identification of early warning signals. Despite lingering concerns about asset quality, management appears confident in steering the bank towards growth opportunities.

The analyst further said there still remains a need for the bank to instil further confidence regarding asset quality.

Price Action: Bandhan Bank’s share price was up 1.23% to trade at ₹180.90 on Thursday afternoon.

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