Analysts Cut Earnings Estimate For RBL Bank Post Weaker-Than-Expected Q3 Results

On the back of weaker than expected results for the quarter ended December, most brokerages have cut their earnings estimate for RBL Bank.

RBL Bank reported higher-than-expected provisions and contraction in margins, with deterioration in asset quality amid high slippages, mainly in the microfinance segment.

Following such results, Emkay Global Financial Services cut its earnings estimate for the bank to 33% for the current financial year, 12% for 2025-26 (Apr-Mar) and 7% for 2026-27 as it is factoring in slower growth.

The brokerage has also cut its target price on the stock to Rs 225, down 10% but has maintained its 'buy' rating.

Nirmal Bang Institutional Equities has lowered its profit estimates for RBL Bank by 39.6% for the current financial year, 20.4% for 2025-26 and 11.7% for 2026-27. This has come after incorporating lower than expected results for the December quarter. The brokerage expects lower loan compounded annual growth rate of 11.8% over FY24-FY27 and higher average credit costs of 2.9% during same period.

It has also cut its target price by 16% to Rs 144 as it believes that the stock will continue to see pressure in the near-to-medium term due to its major verticals--microfinance and credit cards--seeing moderation in growth and stress in asset quality.

While the bank has increased its provision coverage to 82.2%, Nirmal Bang believes that additional stress in the unsecured segment will keep credit costs elevated. It has downgraded the stock to 'sell' from 'hold'.

Motilal Oswal Financial Services also reduced its earnings per share estimates by 8.6% for 2025-26 and 10.0% for the next financial year as the asset quality will likely remain suppressed given the stress in the microfinance space.

This will also keep margins and credit costs under pressure over the near term, prompting the brokerage to estimate return on assets at 0.8% and return on equities at 7.9% for 2025-26. Motilal Oswal has maintained its 'neutral' rating on the stock with a target price of Rs 170.

Brokerage Dolat Capital Research has lowered RBL Bank's earnings estimate for the current financial year by 25% as it factors in higher credit costs and slower growth. It has cut its target price on the stock by 23% to Rs 180 but has maintained its 'accumulate' rating.

While Dolat Capital acknowledges green shoots such as peaking of microfinance stress in Jan-Mar, front-ending of provisions, operational expense efficiencies, and undemanding valuations, it remains cautious on weak risk-return metrics and possible negative surprises stemming from seasoning of secured retail portfolios.