Emkay Global Financial's research report on RBL Bank
RBL reported a strong margin uptick – up 19bps QoQ/44bps YoY to 4.7%, but elevated opex and NPA provisions led to a slight miss on PAT at Rs2.1bn (vs. our est.: Rs2.2bn). However, the bank has guided for 1% exit RoA, as income growth outpaces opex and LLP too moderates with asset quality on the mend. Credit growth improved to 15% YoY/6% QoQ, mainly led by better traction in the retail/SME book. Despite disbursements being impacted for a week in Q3 due to technical upgrade, MFI AUM grew 10% QoQ and should further accelerate in the seasonally-strong 4Q. Deposit growth is also expected to accelerate (3Q at 11% YoY), as built-up franchisee and fintech partnerships deliver results. GNPA ratio improved by 19bps QoQ to 3.6% due to higher recoveries/w-offs and growth. Bank has indicated that the MFI stress flow from the restructured pool is largely done with, which should, thus, lead to moderate slippages. This should result in lower LLP and hence drive-up RoAs to 0.8-1.2%/7-12% over FY23E/FY25E from a loss in FY22.
Outlook
We retain BUY on the stock and upgrade our TP to Rs225 (from Rs160), rolling forward on 0.9x Dec-24E ABV, while taking comfort from improving growth/asset quality and RoE trajectory. The bank’s regulatory compliance should also improve and so reduce the risk of regulatory friction. That said, managing liability amid rising competitive intensity will be closely tracked.