Buy RBL Bank Ltd For The Target Price Rs.258 - LKP Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Result and Price Analysis
The quarterly performance of RBL Bank is showing signs of recovery. The key pointers being, 1) GNPA (3.22%) inched down sequentially by 10bps driven by lower slippages and steady upgrades and recoveries, 2) Restructured book (0.78% of GCA) also decreased, with 15% coverage, 3) Provision expenses (?6.4bn v/s ?2.7bn) up sequentially; with improved PCR of 76%. 4) Non-specific PCR 0.97% of loan is at satisfactory level, 5) NIMs improvement of 5bps on the back of higher YOA, 6) NII growth (38.6% YoY) higher compared to credit growth (21.3% YoY). 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. Furthermore, Management alluded to FY26 goals to grow business (Loans + Deposits) at a CAGR of ~20% and expect PPOP growth to be higher than loan growth. Attractive Valuation at Book Value should support the stock price subject to Management ability to meet its guidance
NPA hiccups are behind; showing strong signs of recovery
The bank’s reported slippages were down at ?5.4bn v/s ?5.6bn the previous quarter. Management expects the slippages to moderate going forward. The up-gradation & recoveries stood at ?1.6bn against ?2.7bn in 1QFY24. Additionally, the write-offs were at ?3.4bn v/s ?3.0bn in the previous quarter. Lower slippages and moderate upgrades and write-offs resulted in decline in the GNPA ratio (3.2%) decreased 10bps sequentially. A higher provisioning expense (credit cost: 90bps) led to NNPA ratio reduction by 22bps to 0.78%. Reported GNPA/NNPA/PCR: 3.12%/0.78%/76% against 3.22%/1.0%/70% in the previous quarter. Wholesale Banking contributed 46% of the total GNPA amount. Contribution of micro banking and credit card stood at 6% and 19% respectively. RBL has built contingent buffers of 100bps created on credit card & microfinance advances to prudently build reserves and strengthen the balance sheet; amounting to ?2.52bn
Please refer disclaimer at www.lkpsec.com/#foo
SEBI Registration number is INM000002483
