RBL Bank Q1 Results Review - Steady Profitability; Credit Costs Rise: Dolat Capital

Dolat Capital Report

RBL Bank Ltd. reported in-line quarter with core net interest margin at ~5.45% (stable QoQ ex of one-off interest income), healthy traction in retail deposits, and robust growth in retail portfolio at 12% QoQ (excluding -micro finance institution). Slippage at 3.4% remained high, led by elevated MFI/CC delinquencies. RoA at 1.1%, however, benefitted from Rs 900 million of reversal in AIF related provisions, resulting in PAT beat by 4%.

Management guides for slightly higher credit costs 2.1-2.2% (2% earlier). Cost/income ratio to improve by 2-3% this year and will be a key lever for RoA expansion. Driven by loan mix changes, NIM should expand in H2 FY25E, as cost of fund stabilises.

We tweak our estimates and maintain ‘Accumulate’ rating valuing the bank at 1x FY26E PBV with unrevised target price of Rs 285 against RoA/RoE of 1.1%/11% for FY26E.

We continue to believe that the banks RoA of 1-1.1% is non-commensurate with risks, given high share of unsecured portfolio (1/3rd book is MFI/CC).

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