RBL Bank Q1 net profit down 47% on higher provisions for COVID-19, other risks

Excess provisions of Rs 460 crore led small sized private sector lender RBL Bank to report a 47 percent decline in June quarter net profit at Rs 141 crore on Tuesday.

The bank said it set aside Rs 240 crore for COVID-19 related provisions, taking the total money set aside due to possible reverses because of the pandemic to Rs 350 crore.

Apart from it, the bank increased its provision coverage ratio (PCR) by setting aside an additional sum of over Rs 200 crore in March.

The overall provisions came at Rs 500 crore as against Rs 196 crore in the same period a year ago.

RBL Bank Managing Director and Chief Executive Officer Vishwavir Ahuja told reporters that its credit costs, which majorly constitute the provisions, will be at the same level or lesser than the 3.35 percent recorded in a high NPA year of FY20.

The gross non-performing assets ratio improved to 3.45 percent as against 3.62 percent in March, but was higher than 1.38 percent in the year-ago period.

Ahuja said the bank is confident of "pleateauing" on the asset quality front in upcoming quarters.

Loanbook under moratorium decreased sharply to 13.7 percent on June 30 from 33 percent at the end of April, with microlending and credit cards having the highest incidence of those availing moratoriums.

Ahuja said that in the microlending segment, 100 percent borrowers were under moratorium as collections had stopped due to lockdown, but the number has come down to 30 percent.

As part of its de-risking efforts, the bank stayed away from corporate segment, and a de-growth in non-wholesale book led to a 2 percent dip in loanbook.

Just like some of its peers, Ahuja said the bank is being helped by faster recovery in rural areas, where the business is stronger.

Deposits, which had suffered during March quarter, grew 7 percent during April-June period.

The bank's core net interest income grew 27 percent to Rs 1,041 as margins remained strong at 4.85 percent, while non-interest income declined 33 percent to Rs 334 crore because of the pandemic.

The overall capital adequacy stood at 16.35 percent, with core tier-I ratio at 15.16 percent, Ahuja said, adding that the bank is not mulling capital infusion despite conducting stress tests.