RBL Bank Q2 Results: Profit Falls 24% On Credit Card, MFI Exposures Stress

RBL Bank Ltd. on Saturday reported a 24% decline in net profit in the September quarter to Rs 223 crore as asset quality challenges emanated from credit cards and microlending books.

The private sector lender had reported a post-tax net profit of Rs 294 crore in the year-ago period and Rs 372 crore in the preceding June quarter.

RBL Bank Chief Executive and Managing Director R Subramaniakumar told reporters that the stress in the microfinance book is due to industry-wide issues, but the same on the credit-card front, where the regulator has been flagging risks for the industry, is on account of internal aspects.

A senior bank official said the lender expects the challenges on credit cards that are arising out of a transition, to take loan collections in-house from being outsourced to a partner earlier, will settle by the end of the third quarter, but the same on microlending may persist longer.

The fresh slippages nearly doubled to Rs 1,026 crore during the quarter, and nearly 70% of the additions came from the credit card book, while the rest were from microfinance, an official explained.

The bank has hired newer hands after it decided to move the collection processes in-house from July, which has resulted in the elevated slippages, while in the case of MFI, it is about over-leveraging among borrowers that has led to higher setbacks.

Clarifying that the bank does not give multiple loans to a single borrower due to which its average exposure size to a borrower is low, the official said it expects stress on this side resulting from industry-wide concerns to settle down not before the March quarter.

"MFI will deteriorate more," the bank official said.

The gross non-performing assets ratio was down 0.25% to 2.88%.

Despite a 15% growth in advances, its core net interest income rose only 9% during the quarter to Rs 1,615 crore and the softer increase was mainly due to the asset quality issues in MFI and credit cards.

The net interest margin narrowed to 5.04% during the reporting quarter as against 5.54% in the year-ago period, the bank official said, adding that it may take up to nine months more before it climbs back to the 5.4-5.5%-mark.

The other income grew 32% to Rs 618 crore and proved to be a major factor compensating for the reverses on the interest income front.

The overall provisions shot up to Rs 618 crore as a result of the elevated stress in the asset quality, and the bank management guided towards an almost similar performance on the credit costs front in the third quarter.

On the deposits front, the bank posted a 20% growth and made it clear that attracting non-bulk and granular liabilities is the focus.

The credit card portfolio will grow at the same level or slower than the overall asset growth, the bank said, adding that it will now look at the quality front, wherein it will try deriving more business from the same customer rather than focusing on portfolio growth alone.

The overall capital adequacy of the bank stood at 15.92% as of September 2024, with the core buffers at 14.19% . The bank will not be looking at a new infusion at least for a year, the bank added.