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Nirmal Bang Report
RBL Bank Ltd.'s earnings were largely in-line with our estimate with profit after tax growth of 37% YoY (29.7% QoQ), led by net interest margin expansion and lower provisions.
Credit growth momentum continued on a sequential basis, with growth of 5.3% QoQ (up by 17% YoY) at Rs 702 billion while deposit grew at a healthy pace of 3.8% QoQ (up by 7.4% YoY) to Rs 849 billion. Calculated NIM came in strong and expanded by 26 bps QoQ to 5%, leading to net interest income growth of 7.1% YoY (5.5% QoQ) to Rs 12.1 billion.
Other income grew by 31.8% YoY and 9% QoQ to Rs 6.7 billion. Moreover, core fee income showed an uptick, increasing by 23.3% QoQ to Rs 6.6 billion. Operating expenditure continued to remain elevated, increasing by 31.1%YoY (7.7% QoQ) to Rs 12.9 billion as the bank continued to invest in infrastructure.
Moreover, provisions declined significantly by 19.8% QoQ and 41.4% YoY to Rs 2.3 billion, leading to a healthy growth in profit after tax at Rs 2.7 billion versus Rs 2 billion in Q4 FY22. Asset quality continued to improve, with the gross non-performing asset ratio declining to 3.37% - at nine quarters' low, led by higher recoveries.
Overall, the management has indicated that credit cost is likely to remain low ~1.5-2% going forward.
RBL Bank's management has unveiled goals for 2026 wherein the bank aspires to grow advances and deposits at 20% plus compound annual growth rate each with focus on retail advances and granular deposits. Also, the management expects return on asset/return on equity to expand by 10-20 bps/100-150 bps every year.
Overall, we believe that RBL Bank bank is on an improving earnings growth trajectory, driven by healthy growth, margin expansion and stable asset quality.
We expect the bank to achieve return on asset/return on equty of 1%/9.2% by FY25.
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