Buy RBL Bank; target of Rs 230: YES Securities

YES Securities' research report on RBL Bank

Capping of potential losses in the high-risk businesses of Cards and MFIs, improvement in rating profile and less vulnerability of the corporate portfolio and impressive handle over cost leads us to upgrade earnings estimates (10-13% for FY21/22) and rating (from ADD to BUY) on the stock. With normalization of credit cost in key product lines, we expect RoA to bounce back sharply to 1.3%. The in-process capital raise will bolster CET-1 to 17.5%, thus strengthening the balance sheet and positioning the bank well to pursue growth in ensuing quarters.

Outlook

Overall, we believe that Q2 FY21 performance and commentary improves the visibility of 1%+ RoA delivery in FY22 and this should uplift valuation.

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