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Result and Price Analysis

The quarterly performance of RBL Bank is showing signs of recovery. The important positive pointers are, 1) GNPA (3.22%) inched down sequentially by 15bps driven by lower slippages and steady upgrades and recoveries, 2) Restructured book (1.05% of GCA) also decreased, with 15% coverage, 3) Provision expenses (?2.7bn v/s ?2.3bn) up sequentially; with stable PCR of 70%. 4) Non-specific PCR 0.70% of loan is at satisfactory level, 5) NIMs moderation of 17bps on the back of higher COF, 6) NII growth (21.3% YoY) stable compared to credit growth (21% YoY). Moreover, there are no substantial negatives to point out. Nevertheless, the bank’s latest business growth strategy around ramping up cards acquisition will entail significant operating expenses, which is expected to keep profitability under pressure in the near-to-medium term. Management achieved its previous guidance to exit FY23 with ROA of 1%. Furthermore, Management alluded FY26 goals to grow business (Loans + Deposits) at a CAGR of ~20% and expect PPOP growth to be higher than loan growth. Stock price recovery will however be subject to profit sustainability and managements endeavor to meet the guidance.

Gazing the Core

NPA hiccups are behind; showing strong sign of recoveries: The bank’s reported slippages were down at ?5.6bn v/s 6.8bn the previous quarter. Management expects the slippages to moderate going forward. The up-gradation & recoveries stood at ?2.7bn against ?3.8bn in 4QFY23. Additionally, the write-offs were at ?3bn v/s ?3.4bn in the previous quarter. Lower slippages and moderate upgrades and write-offs resulted in decline in the GNPA ratio (3.22%) decreased 15bps sequentially. Reported GNPA/NNPA/PCR: 3.22%/1.0%/70% against 3.37%/1.10%/68% in the previous quarter. Wholesale banking contributed 46% of the total GNPA amount, and contribution of micro banking and credit cards stood at 7% and 18% respectively.

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