Private lender RBL Bank’s shares soared by as much as 6 percent on Monday, April 28, after the lender’s quarterly earnings report. Although the bank’s net profit crashed 81 percent on-years, brokerages are optimistic owing to better RoA expectations for the next financial year.
RBL Bank's net profit for the quarter fell to Rs 68.7 crore, against Rs 352.6 crore in the same quarter a year ago. This decline occurred despite an increase in other income compared to the fourth quarter of the previous year and lower provisions as opposed to the December quarter. Other income for the quarter amounted to Rs 1,000 crore.
At 11.15 am, RBL Bank’s shares were quoting Rs 200 apiece, higher by 6.3 percent on-year.
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RBL Bank's net interest income declined by 2.3 percent on-year to Rs 1,563 crore, primarily due to fewer disbursals in the Joint Liability Group (JLG) business. Net interest margins remained stable at 4.89 percent for the quarter. Fresh slippages were Rs 1,060 crore, down from Rs 1,310 crore in Q3FY25 and Rs 1,030 crore in Q2FY25.
The gross NPA (GNPA) ratio improved by 32 bps QoQ to 2.6 percent. The bank is guiding for 16–17 percent loan growth by FY27E, while the net NPA (NNPA) has moderated to 0.29 percent. Despite a decline in NII, the bank's asset quality showed improvement compared to the previous quarter.
Net interest margins (NIMs) are likely to remain range-bound at 5.3 percent during FY26-27E. NIMs should draw support from cut in deposit rates, a 45 percent fixed rate proportion and lower interest reversals. Growth would be led by retail secured and commercial banking. Management expects 16–18 percent loan growth with a significant decline in credit costs in FY26.
Brokerage firm Motilal Oswal upgraded RBL from 'Neutral' to 'Buy' with a target price of Rs 220 per share. “RBL Bank reported a beat in earnings, with margins remaining broadly stable. Asset quality ratios improved during the quarter, with NNPA on the JLG business being nil, following a 100 percent provision on this business,” said the brokerage.
Emkay has maintained its 'Buy' rating for RBL Bank, with a target price of Rs 225. Emkay expects the bank's credit growth to improve in FY26, with a potential rate cut offering a boost to margins, though the shift toward a more secured loan portfolio could partially offset this.
ICICI Securities estimates loan growth of 13 percent for FY26E, with stable pre-provision operating profit (PPOP) and RoA rising to 0.85 percent. The bank could reach 1 percent RoA by FY26E, potentially driving a stock re-rating. ICICI revised its target price to Rs 210 and upgraded the rating to ‘Add’ from ‘Hold’. Risks include higher-than-expected slippages affecting profitability.
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