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Dolat Capital Report
RBL Bank Ltd. reported a good quarter with sequentially higher net interest margin at 5% and lower credit costs aiding profit after tax growth of 40% YoY, with return on asset of 1%.
Elevated opex continues to result in de-growth in operating profits for the quarter and full year.
Though slippages at 3.9% (3.7% in Q3) were slightly higher, healthy recoveries made up for the same. We build in normalised slippages of ~3% over FY24-25E. Restructured book declined to 1.2% (1.4% in Q3).
Sequential loan growth at 5% QoQ was led by retail (up 8%) and growth was broad based across retail including constant currency, micro finance institution, and home loan. Granular liability traction remains healthy.
RBL Bank's asset quality trends are normalising and growth from both core segments and newer retail products is looking up. Improved loan mix in favor of retail and reduction in excess liquidity will be positive for NIM.
However, elevated opex ratios will limit pre-provision operating profit growth in our view. Also, credit costs are unlikely to go below 1.5% given high share of unsecured loans, limiting return on asset expansion.
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