RBL Bank hits 10-month high as CLSA sees 38% upside in 12 months

MUMBAI: Shares of RBL Bank Ltd rose over 2% today and hit their highest level in 10 months after brokerage firm CLSA Asia-Pacific Markets initiated coverage on the stock with a buy rating and a price target of Rs 330, which implies a 38% return from the previous close.

CLSA’s bullish view on the midcap bank is underpinned by the ongoing “second transformation” at the lender as it looks to shift focus away from corporate loans to retail loans.

The private sector lender had come under the scrutiny of investors last year due to its large exposure to certain corporate groups such as Coffee Day Enterprises and others. Investors had singled out the lender to suffer in the manner in which YES Bank Ltd did due to its bulky loan book exposure.

CLSA, however, believes that deposit withdrawal from the lender has stabilised and the asset quality problems of the past few years have given the management an opportunity to shift focus to retail loans in its loan book.

The brokerage firm expects the private sector lender to report 13% return on equity by 2022-23, especially as credit costs normalises with the easing of COVID-19 pandemic.