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What should investors do with RBL Bank after Q4 numbers: buy, sell or hold?

The private lender reported a 34 percent fall in its March quarter profit to Rs 75 crore from Rs 114 crore in the year-ago period.

May 05, 2021 / 09:46 AM IST
 
 
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RBL Bank share price rose 2 percent in the morning trade on May 5, a day after the private lender reported a 34 percent fall in its March quarter profit to Rs 75 crore from Rs 114 crore in the year-ago period.

The net interest income (NII) fell 11 percent to Rs 906 crore against Rs 1,021 crore, YoY. The gross non-performing assets (NPA) stood at 4.34 percent versus 4.57 percent and net NPA at 2.12 percent versus 2.52 percent, QoQ.

Also Read: RBL Bank Q4 net dives 34% as provisions on credit cards, MFI loans rise

Here is what brokerages have to say about the stock and company after the March earnings:

Sharekhan | Rating: Buy | Target: Rs 240

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RBL Bank is in an improved position vis-a-vis its balance sheet and valuations are reasonable. We believe while asset-quality performance is yet to stabilise, adequate capitalisation and limited overhang from the legacy book are positives.

Even though the second wave of the pandemic is a challenge, the bank is better prepared in terms of business continuity solutions and experience of the past year. Moreover, BB and below book being well secured and incremental book quality performing better, etc are silver linings.

Motilal Oswal | Rating: Buy | Target: Rs 250

We expect loan growth to remain weak as the management remains cautious in growing its unsecured segments due to a challenging environment and a resurgence in COVID-19 cases. It has guided at a change in business strategy, with increasing focus towards home, two-wheeler, tractor and gold loans, while de-risking from some of its unsecured portfolios other than cards and MFI business.

While asset quality ratios have improved and collection efficiency across business segments recovered, we continue to remain watchful, given the higher proportion of unsecured assets and uncertain environment. We cut our FY22E/FY23E earnings estimates by 7 percent/9 percent to factor in higher credit cost and subdued loan growth this fiscal.

Citi | Rating: Buy | Target: Cut to Rs 250 from Rs 300

The accelerated provisions, deposits and fees were strong in Q4. PPOP to gradually improve led by fees, improvement in NIM and loan growth.

The credit costs are likely to remain elevated in H1FY22 due to residual provisions on MFI and due to credit card slippages of H2FY21.

Citi has lowered FY22E/FY23E PAT estimates by 16 percent/14 percent as it builds in lower NIM and higher credit costs.

Morgan Stanley | Rating: Underweight | Target: Rs 190

The fourth quarter saw continued weak asset quality, while provisions moved higher QoQ and slippages remained elevated. The overall coverage moved lower to 38 percent versus 44 percent.

The bank could see further challenges given the second COVID-19 wave amid elevated stressed exposure and lower provisions versus peers.

CLSA | Rating: Buy | Target: Cut to Rs 245 from Rs 315

CLSA has cut PAT estimates by 6-14 percent with lower growth and an increase in provisions. The near-term uncertainty remains high, while the normalisation of earnings will likely play out only in FY23.

CLSA maintains "buy" rating due to its undemanding valuation.

Credit Suisse | Rating: Underperform | Target: Rs 180

The bank's slippages remain elevated and growth is likely to lag larger peers amid a potential impact of the second COVID wave and as management looks to bring down the share of the unsecured book (ex-Cards & MFI).

The capital levels remain healthy (CET 16.3 percent).

Dolat Capital | Rating: Buy | Target: Rs 270

RBL’s Q3 earnings were affected by high provisions led by elevated write-offs. Other income benefitted from healthy recoveries from written-off accounts, aiding core PPoP metrics which stood at 3.3 percent.

NIM was stable QoQ at 4.2 percent after the impact of high-interest reversal and compound interest waiver.

Factoring in better operating metrics (NIM and fee growth), earnings have been upgraded by 11 percent/3 percent  for FY22E/23E.

At 0928 hours, RBL Bank was quoting at Rs 183.45, up Rs 1.70, or 0.94 percent, on the BSE.

The share touched a 52-week high of Rs 274 on January 8, 2021 and a 52-week low of Rs 105.55 on May 22, 2020. It is trading 33.05 percent below its 52-week high and 73.8 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: May 5, 2021 09:46 am

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