RBL Bank Q3 Results Review - Inline Quarter; Slightly Higher Delinquencies: Dolat Capital

Dolat Capital Report

RBL Bank Ltd. reported in-line quarter with net interest income/pre provision operating profit growth of 21%/35% YoY, sequentially stable net interest margin at 5.5% (-2 basis points QoQ), and healthy traction in retail deposits (+ 4%).

The bank made Rs1.15 billion of contingent provisions against alternative investment funds, limiting profit after tax growth and return on assets (0.75%) during the quarter.

Slippages at 3.5% were slightly higher, though healthy recoveries (including that from written off accounts) limited credit costs to ~ 170 basis points (excluding of contingent provisions).

Loan growth was led by credit cards, newer secured retail and commercial banking.

We lower earnings for FY24E, factoring impact of AIF provisions. Despite strong execution on growth and healthy profit after tax compound annual growth rate of 26% over FY23-26E, we maintain accumulate as 1-1.2% RoA seems non-commensurate with the risks given the high share of unsecured portfolio (1/3rd book is MFI/credit card)

Maintain 'Accumulate' with unrevised target price of Rs 275, valuing bank at one time September-25E adusted book value against RoA/RoE of 1.1%/10% for FY25E.

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