Last Updated : Jul 22, 2019 05:32 PM IST | Source:

Buy RBL Bank; target of Rs 640: Motilal Oswal

Motilal Oswal is bullish on RBL Bank has recommended buy rating on the stock with a target price of Rs 640 in its research report dated July 20, 2019.

Broker Research
  • bselive
  • nselive
Todays L/H

Motilal Oswal's research report on RBL Bank

RBK reported 1QFY20 PAT at INR2.7b (41% YoY growth, inline) though the guidance on asset quality will drive elevated credit cost and impact earnings trajectory over the coming quarters. GNPA increased 4.6% QoQ to INR7.9b (1.4% of loans) while NNPA stood flat at INR3.7b enabling 230bp QoQ improvement in PCR to 52.9% (69.1% including TWO). RBK guided for: (i) Elevated stress in a few corporate accounts (exposure: INR9-10b), (ii) Incremental credit cost of ~35-40bp towards these exposures, and, (iii) GNPA ratio to increase to 2.3-2.5% by end-FY20 from 1.38% currently. NII grew 48% YoY to INR8.2b, led by 35% YoY growth in advances and 8bp QoQ expansion in the margin to 4.3%. Core fees increased 41% YoY (+5% QoQ) to INR4.1b, driven by credit cards (+66% YoY; ~47% of total fees). Loan book grew 35% YoY, led by strong growth in retail book (+62% YoY), while wholesale book grew 23% YoY. The share of retail loans increased by 160bp QoQ to ~46%. Deposits base increased 35% YoY led by a robust 73% YoY increase in SA deposits. CASA ratio increased to 25.8% (+80bp QoQ).


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. We, thus, cut our PAT estimates by 12%/9% for FY20/21 as we factor in higher credit cost of 160bp/140bp for FY20/21 (~100bp in FY19) though robust margins and improving profitability in the cards business will still facilitate 30% earnings CAGR over FY19-21. We revise our TP to INR640 (2.5x FY21E BV). Maintain Buy.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

First Published on Jul 22, 2019 05:32 pm