Bandhan Bank Limited: history, ownership, mission, how it works & makes money

A Brief History of Bandhan Bank Limited

Founded in 2015, Bandhan Bank Limited emerged from Bandhan Financial Services Limited, which had originally focused on microfinance. Bandhan Financial started its operations in 2001, providing financial services to the underbanked segments of society.

In its initial public offering (IPO) in March 2018, Bandhan Bank raised approximately ₹4,473 crore (around $670 million), marking one of the largest listings on the Indian stock market. The IPO was priced at ₹375 per share and saw strong demand, reflecting investor confidence.

As of March 2023, Bandhan Bank reported a net profit of ₹2,462 crore for the fiscal year, a year-on-year increase of 45%. The total assets of the bank were approximately ₹1,18,596 crore, while it had a gross non-performing assets (NPA) ratio of 6.35%.

In terms of market capitalization, Bandhan Bank was valued at approximately ₹56,000 crore ($8.5 billion) as of October 2023.

Bandhan Bank's customer base has grown significantly since its inception, with over 2.51 crore customers and a robust network of more than 1,260 branches across India. The bank's focus remains on microfinance and small loans, serving the needs of the underserved.

Due to its growth trajectory, Bandhan Bank was able to expand its product offerings, including savings accounts, loans, and insurance products. Its net interest margin stood at 7.6% in FY 2023, reflecting efficient management of its interest income and expenses.

Moreover, Bandhan Bank has been recognized for its efforts in financial inclusion, winning various awards for its microfinance initiatives. The bank also plays a significant role in supporting women entrepreneurs, with approximately 70% of its loans provided to female borrowers.

Following the pandemic, the bank adopted new digital initiatives, enhancing its online banking platform, which contributed to a sharp increase in digital transactions by 135% year-on-year in 2022.

In the competitive landscape of Indian banking, Bandhan Bank has positioned itself effectively by leveraging its unique model of microfinance and focusing on retail banking. Its commitment to sustainable growth and financial inclusion continues to set it apart in the Indian banking sector.

A Who Owns Bandhan Bank Limited

Bandhan Bank Limited, headquartered in Kolkata, India, is recognized for its unique operational model as a microfinance institution turned commercial bank. As of March 2023, the bank has a significant ownership structure involving various key stakeholders.

The primary shareholders in Bandhan Bank include institutional investors, individual shareholders, and the founding entity.

Key Shareholders

The shareholding structure indicates that Bandhan Financial Holdings Limited, the promoter, retains the largest stake at 40.96%, highlighting its continued influence over the bank’s strategic decisions. In contrast, a diverse array of institutional investors holds a combined share of approximately 19.14%.

As reported in the bank's Q4 FY2023 earnings, Bandhan Bank recorded a consolidated profit after tax (PAT) of ₹1,057 crore, up from ₹850 crore in the previous year, representing a growth of 24.4%.

The bank's total assets as of March 2023 stood at approximately ₹1,41,000 crore, showcasing a year-on-year increase. Notably, the net interest income (NII) for the same period was reported at ₹4,430 crore, reflecting a healthy year-on-year growth rate of 29.3%.

Market Performance

Bandhan Bank's stock is traded on the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE). As of October 2023, the stock price was approximately ₹250 per share, with a market capitalization of around ₹68,000 crore.

The bank’s price-to-earnings (P/E) ratio stood at approximately 32.5, indicating investor optimism about future earnings growth. Its return on equity (ROE) was reported at 18.3%, demonstrating effective utilization of shareholders' equity to generate profits.

This ownership landscape, coupled with robust financial performance, positions Bandhan Bank as a noteworthy player in the Indian banking sector. The bank's strategic direction is heavily influenced by its largest shareholders, with a focus on expanding its retail footprint and enhancing its product offerings.

Bandhan Bank Limited Mission Statement

Bandhan Bank Limited aims to be a world-class bank that serves the financial needs of its customers while also being socially responsible. The mission statement emphasizes inclusivity, customer satisfaction, and sustainable economic growth.

The bank is committed to serving individuals and small businesses, focusing on creating opportunities through financial services. Bandhan Bank strives to provide financial products that cater to various customer segments, including microfinance, small and medium enterprises (SMEs), and retail banking.

As of September 2023, Bandhan Bank had a total customer base of over 2.64 crore (26.4 million) customers. The bank's vision encapsulates a commitment to uplift the underserved by providing access to banking services and enhancing financial literacy among its customers.

The bank's values align with the concept of "Banking for All," which indicates its goal of promoting financial inclusion among all demographics, particularly in rural and semi-urban areas. Bandhan Bank believes that by empowering its customers financially, it can contribute to the overall economic development of the country.

Bandhan Bank's commitment to reach out to the unbanked population is reflected in its substantial presence across India, especially in the eastern and northeastern regions. The bank’s strategic approach to microfinance and retail banking continues to shape its operations, enabling it to further its mission of financial inclusivity.

The bank's focus on sustainability is also evident in its various initiatives aimed at social development and environmental stewardship. Bandhan Bank is dedicated to maintaining high standards of corporate governance to ensure that it operates ethically and transparently, which is crucial for building trust with its stakeholders.

In keeping with its mission statement, Bandhan Bank endeavors to innovate and expand its range of financial products to cater to the evolving needs of its customers. This includes leveraging technology to enhance customer experience and operational efficiency.

Through its mission to serve the financially excluded and promote self-sufficiency, Bandhan Bank continues to position itself as a significant player in the Indian banking landscape.

How Bandhan Bank Limited Works

Bandhan Bank Limited, established in 2015, operates as a commercial bank in India, providing a wide range of financial services. It specializes in microfinance, catering primarily to underbanked and underserved segments of the population. As of March 2023, Bandhan Bank reported total assets of approximately INR 1.36 lakh crore (approximately USD 16.5 billion).

One of the key operational facets of Bandhan Bank is its extensive branch network. By March 2023, it boasted over 1,200 branches across 34 states and union territories in India. This geographical diversity enables the bank to tap into various local markets and customer segments, enhancing its outreach.

In terms of funding, Bandhan Bank has a diverse deposit base. The bank holds a total deposits amounting to around INR 1.15 lakh crore as of the latest financial reports. The bank's high savings account growth is notable, with a year-on-year increase of approximately 20%.

Bandhan Bank derives a significant portion of its income from interest on loans. As of FY 2022-2023, the bank reported a net interest income of about INR 4,300 crore (around USD 520 million). The total loan book stood at approximately INR 97,000 crore (around USD 12 billion), with a focus on micro, small, and medium enterprises (MSMEs) and retail lending.

The bank’s customer-centric model emphasizes not only financial inclusion but also technology integration. Bandhan Bank has invested heavily in digital banking solutions, leading to a significant increase in online transactions, which recorded a rise of about 40% year-on-year.

As of the end of the financial year 2022-2023, the bank reported a Gross Non-Performing Asset (GNPA) ratio of 1.75%, reflecting its strong asset quality management. The bank aims to maintain this ratio while growing its loan book further.

With an emphasis on sustainability and social responsibility, Bandhan Bank also undertakes various initiatives aimed at improving the socio-economic conditions of its borrowers. This approach positions the bank favorably within the microfinance sector, facilitating growth and stability.

In the competitive landscape, Bandhan Bank operates under the regulatory framework of the Reserve Bank of India (RBI) and adheres to all statutory requirements. The bank's commitment to compliance ensures the maintenance of trust and customer confidence.

Overall, Bandhan Bank Limited exemplifies a robust banking model focused on inclusive growth, community development, and sustainable financial practices.

How Bandhan Bank Limited Makes Money

Bandhan Bank Limited, primarily based in India, generates revenue through several core banking operations, including interest income from loans and advances, fees from various banking services, and investment income. The bank focuses mainly on microfinance and has expanded its footprint in retail banking since its inception.

The primary source of income for Bandhan Bank is the interest earned on loans. According to the bank's financial results for the fiscal year ending March 2023, Bandhan Bank reported a total income of ₹13,700 crores, representing a robust growth in its core loan portfolio.

As of March 2023, Bandhan Bank's gross advances stood at ₹99,000 crores, with a significant portion attributed to microfinance loans, which accounted for approximately 53% of the total loan book, amounting to ₹52,500 crores. The retail lending segment has also expanded, contributing to the bank's income diversification.

In addition to interest income, Bandhan Bank earns revenue through service fees, which include charges for account maintenance, transaction fees, and other ancillary services. For FY 2023, the bank's fee-based income contributed approximately ₹1,200 crores, showcasing its efforts to enhance non-interest revenue streams.

Bandhan Bank also invests in government securities and bonds, providing a stable source of income. The bank's investment income for FY 2023 was ₹1,300 crores. The return on these investments typically ranges from 6% to 8%, depending on the type of securities held.

Another financial highlight for Bandhan Bank is its asset quality, which impacts profitability. As of March 2023, the bank reported a Gross NPA (Non-Performing Assets) ratio of 6.3%, and a Net NPA ratio of 2.4%, indicating a relatively manageable level of defaults compared to industry standards.

In summary, Bandhan Bank's revenue generation is driven by interest from loans, fee income, and investment returns, underpinned by its dominant position in the microfinance sector and a growing retail banking portfolio. The bank aims to leverage technology and digital banking to further enhance its profitability and reach.