Shares of RBL Bank advanced 3.9 per cent to Rs 134 per share on the BSE on Friday after the bank clocked string operating performance in the March quarter of FY20 (Q4FY20) despite the Covid-19 related concerns. The lender logged a healthy 37 per cent year-on-year (YoY) growth in its operating profit at Rs 765 crore compared to Rs 560 crore a year ago.
At 10:04 am, the stock was trading 1 per cent higher at Rs 130.20 apiece on the BSE. In comparison, the S&P BSE Sensex was at 31,872.61 level, up 429.23 points or 1.37 per cent. The stock of the bank bounced 5 per cent off its intra-day low of Rs 127.65.
The bank’s total revenue jumped 33 per cent YoY to Rs 1,522 crore from Rs 1,148 crore reported in Q4FY19, while its net interest income came in at Rs 1,021 crore, up 38 per cent from Rs 739 crore in Q4FY19. Besides, the bank recorded net interest margin (NIM) at 4.93 per cent during the quarter under review.
That apart, non-interest income for Q4FY20 grew 22 per cent to Rs 501 crore, core fee income rose 21 per cent QoQ to Rs 470 crore, and non-wholesale fees attributed 78 per cent of the bank’s total fee income.
For the whole financial year of 2019-20, the bank's total income stood at Rs 5,540 crore, up 39 per cent YoY from Rs 3,982 crore, while its operating profit jumped 42 per cent YoY to Rs 2,752 crore from Rs 1,940 crore in FY19.
The lender's pre-tax profit, however, declined 58 per cent YoY to Rs 151 crore compared to Rs 360 crore in Q4FY19. The net profit of the bank also declined 54 per cent to Rs 114.36 crore from Rs 247.18 crore.
Analysts at Motilal Oswal Financial Services maintain their 'buy' rating on the stock, but have cut their FY21 and FY22 net profit estimates by 6 per cent and 5 per cent, respectively primarily due to expected moderation in fee income, led by reduced economic activity and lockdown.
"RBK reported weak business trends, weighed by decline in wholesale assets and deposit outflows. Higher provisions impacted earnings, but slippages moderated on a sequential basis, enabling improvement in the coverage ratio. Asset quality is expected to remain under watch as 33% of the loan book availed moratorium, with management guiding for elevated credit costs in credit cards/MFI/MSME portfolio," they wrote in their results reciew note.
Provisions and contingencies of the bank rose to Rs 614 crore in Q4FY20 as opposed to Rs 200 crore in the Q4FY19. The provisions made by the bank because of the Covid-10 amount to Rs 115 crore, which is well above Reserve Bank of India prescribed norms. Furthermore, the bank reported a provision coverage ratio (PCR) of 64 per cent in Q4FY20, significantly higher than PCR of 58 per cent in Q3FY19.
The bank’s gross non-performing assets (NPA) also shot up to 3.62 per cent at the end of Q4FY20 compared to 1.38 per cent at the end of March, 2019. At the end of Q3FY19, the gross NPA was 3.33 per cent. The net NPAs ratio also moved up to 2.05 per cent at the end of Q4FY20 compared to 0.7 per cent at the end of Q4FY19. The slippage ratio fell to 1.19 per cent in the period under review as opposed to 1.79 per cent in Q3FY19.
“Against this backdrop, we will continue to be cautious, conservative and focused on preservation of the franchise. As a Bank, we will look to maintain surplus liquidity high capital levels, tighten risk filters further to manage and improve credit quality, and balance sheet protection”, said Vishwavir Ahuja, MD and CEO, RBL Bank. The bank's management also said that the lender sees some stress emanating from the retail segment.
"The management did not highlight any new stress on the corporate loan portfolio, a view we have shared as well, however, we would have to wait till 1HFY20 to see if there was any lagged recognition as the book has a high share of loans under moratorium. The only key variable to watch would be the credit card and MFI portfolio. These are short duration loans and hence, any impact, would be visible by 1HFY20," said analysts at Kotak Institutional Equities. They maintain BUY rating with a FV revised to Rs270 (from Rs300 earlier) valuing the bank at 1.2X book and 20X March 2022 EPS for RoEs in the range of ~8-10 per cent in the medium term.