HDFC Securities is bullish on RBL Bank has recommended buy rating on the stock with a target price of Rs 584 in its research report dated July 20, 2018.
HDFC Securities' research report on RBL Bank
It was a quarter full of positives for RBK with robust loan growth (+36% YoY), steady asset quality (GNPAs flat at 1.7%) and superlative fee traction (+59% YoY), owing to cards. The steady uptrend in retail yields (+110bps YoY) drove up NIM to 4.04% (+50bps YoY), despite the continued pressure on corporate yields (-70bps YoY). RBK’s tight grip on costs was visible as sequential opex growth at ~4% was significantly lower than the trailing 8-qtr average of ~9%. Industry leading growth (albeit on a smaller base), improving margin trajectory and a tight fix on asset quality drive our positive stance on RBK. We believe improving retail profitability, uptrend in margins and better oplev will push return ratios upwards (19bps over FY18-20E).
While capital (Tier 1 of 13.1%) is not a hindrance in the near term, a book accretive fund raise will create comfort on valuations. Maintain BUY with a TP of Rs 584 (3x Mar-20E ABV of Rs 195).
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