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Shares of private sector lender Bandhan Bank ended 4.3 percent higher on Tuesday after Hong Kong-based brokerage CLSA upgraded the stock to buy from its earlier rating of outperform.

Its price target of Rs 300 implies a potential upside of 33 percent from Monday's closing price.

The firm believes that Bandhan Bank has lagged most of its Microfinance peers due to its concentrated exposure to most MFI leveraged states.

After the bank witnessed high restructuring during the pandemic, CLSA expects some clean-up in the bank's books during the December quarter as overdue loans worth Rs 4,0000 crore age and get provided for. It also expects the bank to benefit from a cyclical recovery in MFI collections.

A consistent growth in the lender's non-MFI portfolio is providing some diversification to the bank, according to CLSA, who also expects provisioning to ease from the March quarter of the current financial year.

However, CLSA cut Bandhan Bank's earnings estimates for the current financial year by 26 percent and for the upcoming two financial years by 3-5 percent respectively.

At 1.6 times financial year 2024 price-to-book, CLSA finds Bandhan Bank's valuations to be attractive and the risk-reward to be favourable.

For the September quarter Bandhan Bank’s net interest income grew 13.3 percent year-on-year to Rs 2,193 crore, but came in below the expectations of Rs 2,422.9 crore. The lender’s net interest margin dropped 100 basis points quarter-on-quarter to 7 percent from 8 percent.

Shares of Bandhan Bank ended 4.3 percent higher at Rs 234.10.

Also Read: Bandhan Bank arguably underestimated the number of stressed loans, tanks 9%