Bandhan Bank Q3 Results: Profit Jumps 84% QoQ, Stock Rallies

Introduction

Bandhan Bank's stock surged over 4% on Friday, January 23, 2026, after the private sector lender announced a robust financial performance for the third quarter of fiscal year 2026. The bank reported a significant 84% quarter-on-quarter (QoQ) increase in net profit, coupled with a marked improvement in its asset quality. This strong sequential recovery has fueled investor optimism and prompted several brokerage firms to upgrade the stock, suggesting a potential turnaround for the lender.

Sequential Performance Shows Strong Recovery

For the quarter ended December 31, 2025, Bandhan Bank posted a standalone net profit of ₹206 crore, a substantial rise from the ₹112 crore reported in the preceding quarter (Q2 FY26). The bank's total income also saw a healthy sequential growth of 7.8%, reaching ₹6,122.24 crore.

Net Interest Income (NII), the core income for a bank, grew by 3.8% QoQ to ₹2,688 crore. The Net Interest Margin (NIM) witnessed a slight expansion, moving up to 5.9% from 5.8% in the previous quarter, aided by a lower cost of funds. Furthermore, the operating profit for Q3 FY26 stood at ₹1,445 crore, marking a 10% increase from the ₹1,310 crore recorded in Q2 FY26.

Year-on-Year Comparison Remains Subdued

While the quarter-on-quarter figures indicate a strong operational rebound, the year-on-year (YoY) comparison presents a more modest picture. The net profit of ₹206 crore in Q3 FY26 was a 51.79% decline from the ₹426 crore earned in the same quarter of the previous fiscal year. Similarly, total income fell by 7.11% YoY. This highlights that while the bank is on a recovery path, it has yet to surpass its performance from the prior year.

Significant Improvement in Asset Quality

A key highlight of the Q3 results was the substantial improvement in the bank's asset quality. The Gross Non-Performing Assets (GNPA) ratio saw a significant reduction of 169 basis points, falling to 3.33% from 5.02% in the second quarter. The Net NPA (NNPA) ratio also improved, declining by 38 basis points to 0.99% from 1.37% QoQ. This improvement was partly driven by the sale of a stressed loan portfolio to an asset reconstruction company. The bank maintained a strong Provision Coverage Ratio (PCR) of 84.3%, providing a solid cushion against potential loan losses.

Key Financial Metrics (Q3 FY26)

Steady Business Growth

Bandhan Bank continued to expand its business operations, crossing the ₹3 lakh crore milestone in total business during the quarter. As of December 31, 2025, total deposits grew by 11% YoY to reach ₹1.57 lakh crore. The CASA (Current Account Savings Account) ratio stood at 27%. Gross advances also increased by 10% YoY to ₹1.45 lakh crore. The growth was well-diversified across segments, with the retail book (excluding housing) growing by 57%, wholesale banking by 32%, and the housing book by 10% on a YoY basis.

Market Reaction and Analyst Upgrades

The positive quarterly report card led to a strong rally in Bandhan Bank's shares, which climbed 4.42% to close at ₹148.95. The sentiment was further bolstered by positive reports from several brokerages. Motilal Oswal upgraded the stock to 'Buy' with a target price of ₹175. JM Financial revised its rating to 'Add' with a target of ₹160, while Emkay Global also moved its rating to 'Buy' with a target of ₹180. Analysts cited normalizing asset quality and inexpensive valuations as key reasons for their optimism, though some remained watchful of the bank's credit costs.

Management's Forward-Looking Statement

Commenting on the results, MD & CEO Partha Pratim Sengupta stated, "Bandhan Bank's third-quarter performance reflects the strengthening fundamentals and steady turnaround." He added that the bank is set to accelerate multiple digital initiatives in the fourth quarter to enhance customer experience and operational efficiency. "We remain fully committed to building a strong, more resilient and more diversified bank. These efforts position us well for sustainable and profitable growth going forward," he said.

Conclusion

Bandhan Bank's Q3 FY26 results signal a significant sequential turnaround, driven by improved profitability and a much healthier asset quality profile. While the year-on-year performance still lags, the strong recovery trend has restored confidence among investors and analysts. The management's focus on digital transformation and continued business growth will be critical in sustaining this momentum and achieving long-term profitable growth.