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Last Updated : Aug 28, 2019 08:51 PM IST | Source:

RBL Bank: Concerns on asset quality, slower loan growth weigh on profitability

The stock touched 52-week low of Rs 291.90 during intraday trade on August 28. Soon after, the bank issued a clarification to exchanges stating that 25 percent of its employees held stocks under the Employee Stock Ownership Plan (ESOPs).

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Private lender RBL Bank may see deterioration in its asset quality amid lower credit growth going ahead, triggering concerns on the stock as it fell to a 52-week low on August 28. There were also reports of some senior employees dumping shares over the past month.

The stock closed 12.09 percent lower at Rs 313.65, as compared to the previous close. It reached its 52-week low of Rs 291.90 during intraday trade. Soon after, the bank issued a clarification to exchanges stating that 25 percent of its employees held stocks under the Employee Stock Ownership Plan (ESOPs).

“Market transactions in RBL Bank shares by employees is a routine activity with regular exercise of ESOPs and sale of equity shares thereafter. The ESOPs exercised and sale of equity shares by the employees for the month of July 2019, is in line with the past. Further, no Management Committee member, including Key Managerial Personal (KMP) have sold any shares on July 30, 2019 and thereafter till date,” the bank said in a note to exchanges.

In a series of investor meetings held over the past month, RBL Bank officials expressed concerns on few corporate loan accounts that may slip into the non-performing asset (NPA) category.

A report released by Emkay Research on August 27, said that RBL Bank has toned down its loan growth and the focus is now on asset quality. “We believe that the stock will remain under pressure until the bank recognizes its corporate stress pool and resumes its otherwise high RoA trajectory,” Anand Dama and Rahul Malani, analysts at Emkay Research said.

The bank may see slippages of up to 70 percent of its stress pool in a worse case scenario, the report said. The lender has identified stressed accounts of Rs 900-1,000 crore in its corporate book.

However, the bank’s exposure to Cafe Coffee Day remains standard and out of the stress pool with no risk of impairment as management is in the process of asset sale to pay off debt, the report said. The bank has not disclosed its exposure to the company.

Motilal Oswal, in its report released last month said that capital raising of Rs 2,500 crore over the next financial year will be essential to support ongoing momentum in business growth. “RBL has demonstrated strong momentum in business growth and earnings. However, the exposure to a few stressed corporate accounts is likely to drive an increase in provisioning expenses and dent the earnings trajectory,” the report said.

The bank has lowered its credit growth outlook to 20-25 percent, down from 30-35 percent for the current financial year as it plans to trim wholesale loan book growth to 10 percent from 28 percent currently. The bank will focus on reorienting the portfolio toward retail and managing asset quality instead of growth, analysts said.

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First Published on Aug 28, 2019 08:47 pm
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