Buy RBL Bank; target of Rs 275: Emkay Global Financial

Emkay Global Financial's research report on RBL Bank

RBL Bank continued to report strong profitability, up 43% YoY/6% QoQ to Rs2.9bn/1% RoA on account of strong credit growth, lower opex and contained provisions. NIM was down 17bps QoQ to 4.8% from its peak of 5% due to higher CoF, but the bank expects better portfolio mix towards retail to keep margins healthy. This coupled with improving fees (including payments/cards) and contained opex should lead to 30% core PPoP growth over FY23-26E. Despite moderation in NPA , the bank has guided for elevated LLP in FY24E and would like to maintain a contingency buffer to guard against any potential assetquality hiccups.

Outlook

Factoring in better growth/NIM, we have revised our earnings estimates for FY25/26E by 1/6% and expect the bank to deliver healthy RoAs/RoEs of 1- 1.3%/9-14% over FY24-26E vs. 0.8%/7% during FY23. With better expected delivery on growth/RoA/RoE, we now value the bank at 1x its June 25E ABV and revise the TP to Rs275/share from Rs225/share earlier.