RBL Bank Q3 Results Review — Weak Quarter With Sharp Rise In Stress; Dolat Capital Maintains 'Add'; Revises TP

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Dolat Capital Report

RBL Bank Ltd. reported negligible profit after tax (loss at PBT level) led by a sharp rise in credit costs (5.3%) despite higher one-off trading gains and favorable tax order of Rs 1.5 billion. Net interest margin (-15 bps to 4.9%) was impacted by high interest reversals and lower JLG disbursals.

In Q3, 8% of MFI book (non-annualized) slipped to NPA and similar amount is guided to slip in Q4. While slippage (at 6%) increased by 28% QoQ, provisions nearly doubled as the bank accelerated provisions on MFI book, with 900 bps rise in sequential provision coverage ratio to 82% (net non-performing asset at 0.5%, -26 bps QoQ). Additionally, significant write-offs helped stable gross non-performing asset ratio QoQ at 2.9%. The bank will likely utilize Rs 2.7 billion of contingent provisions in Q4.

We lower FY25E earnings by 25%, factoring higher credit costs and slower growth. Maintain ‘Accumulate’ rating, valuing the bank at 0.6 Sep-26E PBV with revised target price of Rs 180. While we acknowledge green shoots like peaking MFI stress (in Q4), front-ending of provisions, opex efficiencies, and undemanding valuations, we remain cautious on weak risk-return metrics and possible negative surprises stemming from seasoning of secured retail portfolios.

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