Citi opens 90-day positive catalyst watch on RBL Bank, sees 19% upside; shares gain

Citi opened a 90-day positive catalyst watch on RBL Bank.

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26 Aug, 2025 12:21

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International brokerage Citi Research opened a 90-day positive catalyst watch on private lender RBL Bank Ltd, expecting an improvement on RoA or returns on assets going ahead.

Citi reiterated its bullish 'buy' call on the lender, hiking its target price to Rs 285 per share, up from Rs 230 earlier. This indicates an upside potential of around 19 percent from the previous session's closing price.

The brokerage believes that the RoA trajectory can improve to 45-50 basis points, driven by the much-awaited normalization of credit costs. According to the brokerage, accelerated provisioning on joint liability group/credit card segment will help normalise these costs.

Further Citi added that the stress in the joint liability group and credit card portions will subside further in Q1. RBL Bank's slippages are likely to moderate to 4.5 percent, down from 4.7 percent in Q4FY2025.

In the previous quarter, the bank undertook accelerated provisioning, covering all gross non-performing assets (GNPAs) in the joint liability group (JLG) segment and 75 percent of special mention accounts (SMAs). Coupled with sufficient buffers in the credit card segment, this move is expected to reduce credit costs to approximately 2.2 percent.

At 9.20 a.m., shares were quoting Rs 242.77 on the NSE, higher by 1.5 percent.

A shift in the loan portfolio towards more secured categories and the repricing of floating-rate loans could compress net interest margins (NIMs) by around 28 to 30 basis points. However, NIMs (net interest margins) are likely to bottom out sooner in Q1, which is the current fiscal quarter, compared to peers.

Across the broader banking sector, Citi projects annual loan growth of 9 percent and a sequential rise of 2 percent, mainly driven by commercial banking, business loans, and mortgages. Deposits are forecast to grow 10 percent year-on-year and 1 percent quarter-on-quarter.