Nirmal Bang Retains 'Sell' On RBL Bank Says Higher Unsecured Loan Exposure A Key Concern

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Nirmal Bang Report

We hosted the management of RBL Bank Ltd., represented by Mr. Ramesh Ramnathan, Head - Investor Relations, at our investor conference. Based on the queries put forth by institutional investors, following are the key takeaways:

1. Loan growth guidance for FY26 maintained at 15-16%. Deposits to grow 20%. The net interest income in FY26 is expected to be a little lower than FY25, but the same will be compensated for by higher other income. Pre-provision operating profit is expected to be flattish in FY26.

2. The bank should exit FY26 with RoA of 1%.

3. Credit card loan growth is likely to be 10% in FY26. The credit costs in the segment are expected at 6-6.5%.

4. The X bucket collection efficiency in microfinance was 99.1% in Apr-25. If this collection efficiency holds for Q1 FY26, then slippages in Q2 FY26 will be incrementally lower and asset quality and credit costs will go back to normal in H2 FY26.

We have valued RBL Bank at 0.7x Mar-27E adjusted book value (as against 0.5x Mar-27E ABV earlier) deriving a target price of Rs 200 (Rs 155 earlier).

Our target multiple is at a 15% discount to the past five-year average multiple of 0.82x.

In our view, RBL Bank stock will see an overhang in the near-to-medium term due to its two major verticals, microfinance and credit cards, seeing moderation in growth and asset quality stress. We maintain a 'Sell' rating on the stock.

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