RBL Bank Ltd.'s September-quarter results drew mixed reactions from brokerages, with Citi maintaining its bullish stance on expectations of a recovery in return on assets, while Goldman Sachs retained its sell rating citing muted retail loan growth and slower-than-expected improvement in credit costs.
The bank reported a sharp rise in net interest income and operating profit on a year-on-year basis, while asset quality improved sequentially. However, elevated provisions and mixed asset quality trends remain key factors for investors to track.
RBL Bank Q2 Highlights
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- Net interest income rose 37.5% to Rs 2,131 crore from Rs 1,550 crore a year ago.
- Provisions stood at Rs 767 crore, compared with Rs 599 crore in the previous quarter and Rs 500 crore a year ago.
- Operating profit increased 91.8% to Rs 1,396 crore from Rs 728 crore a year ago.
- Net profit rose to Rs 482 crore from Rs 179 crore in the year-ago period.
- Gross non-performing assets stood at 1.02%, compared with 1.30% in the previous quarter.
- Net non-performing assets declined to 0.29% from 0.37% in the previous quarter.
The improvement in profitability was accompanied by a sequential improvement in asset quality, with both gross and net non-performing asset ratios declining. However, higher provisions weighed on the overall picture.
Here's What Brokerages Are Saying After RBL Bank's Q2 Results
Citi
Maintains Buy; Target Price At Rs 505
- Strong net interest margin performance was tempered by elevated provisioning.
- Return on assets recovery is on the horizon.
- Advances growth accelerated, led by wholesale lending, while the deposit mix shifted towards retail.
- Capital levels are normalising following deployment.
- Integration with Emirates NBD remains on track.
Goldman Sachs
Maintains Sell; Raises Target Price To Rs 310 From Rs 285
- Retail loan growth remained largely muted.
- Earnings estimates were raised to factor in strong foreign currency non-resident bank deposit flows.
- Adjusting for FCNR-B deposits, deposit growth declined 1% sequentially.
- Net interest margins rose 48 basis points sequentially, largely driven by the equity capital raise.
- Asset quality trends were mixed, while the pace of credit cost improvement was slower than expected.
Also Read: RBL Bank Q2 Results: Net Profit Nearly Triples To Rs 482 Crore, Asset Quality Improves
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