Buy RBL Bank; target of Rs 250: Emkay Global Financial

BUY

Emkay Global Financial' research report on RBL Bank

We met RBL Bank MD and CEO R S Kumar to discuss the bank’s future outlook following a clean-up act in FY25, due to elevated stress in its unsecured portfolio. The management indicates that peak asset quality stress in the MFI and credit card segments is largely behind and expects growth to resume— albeit in a more calibrated way—in the near term. This coupled with continued strong growth in the secured portfolio (expected to grow at 25-30%) should improve overall growth in FY26E (by 16-17%). The bank is relatively wellpositioned to manage margins in the near term, given a higher share of fixedrate portfolio and sufficient room to lower the SA rate. In the long run, a higher share of secured retail and SME loans is expected to support healthy riskadjusted margins. This, coupled with an improvement in the opex ratio, should drive up the bank’s RoA from a low of 0.5% in FY25 to 0.8-1.2% over FY26-28E. The bank is in no hurry to raise capital (CET 1 at 14.1%) and would look at an opportune time and price to build the capital buffer.

Outlook

Factoring in the improvement of growth and asset quality outlook, we revise our TP upward by 11% to Rs 250, valuing the stock at 0.8x FY27E ABV, and retain BUY.

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RBL Bank - 04062025 - emkay