Buy RBL Bank; target of Rs 270: Motilal Oswal
Motilal Oswal is bullish on RBL Bank has recommended buy rating on the stock with a target price of Rs 270 in its research report dated January 28, 2021.
February 03, 2021 / 08:50 PM IST
Motilal Oswal's research report on RBL Bank
RBL Bank (RBK) reported a modest quarter on weak NII growth – as margins declined 15bp QoQ, impacted by higher interest reversal. However, a sharp improvement in core fees, led by Credit Card, resulted in a PAT beat. On the business front, deposit growth picked up sequentially, led by CASA, while loan growth was affected by continued decline in the Wholesale portfolio. The Credit Card business, however, picked up sharply QoQ. n Asset quality witnessed sharp deterioration, with the proforma GNPA/NNPA ratio up to 4.57%/2.37%, led by elevated slippages from the Retail portfolio, predominantly from the unsecured portfolio. On the other hand, corporate slippages were contained. Total restructuring is expected at 1.5% of total loans. n Overall, we expect the slippage trend to remain elevated and estimate credit cost to remain high in the near term at 3.8%/3.3% for FY21/FY22. However, we increase our estimates by 6%/11% for FY22/FY23, factoring in higher other income. Maintain Buy.
We increase our earnings estimates for FY22/FY23 by 6%/11% on the back of improvement in core operating performance. The stock currently trades at cheap valuations of 1x FY22E ABV; Maintain BUY, with TP of INR270 (1.2x Sep’22E ABV).
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