Shares of RBL Bank slumped 5 percent in the morning trade on May 2 as participants appeared cautious despite the private lender’s improved showing in the March quarter. Analysts believe higher operating expenses and elevated credit costs could play spoilsport.
At 11.48 am, the RBL Bank was trading 3.3 percent lower at Rs 156.35 on the BSE.
The lender on April 29 reported a 37 percent YoY jump in its standalone net profit at Rs 271 crore for the March quarter. The private lender's net interest income (NII) rose 7 percent year-on-year to Rs 1,211 crore. While net profit managed to beat Street estimates of Rs 222 crore, NII was tad below the estimate of Rs 1,219.6 crore.
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Brokerages on Q4 numbers
RBL Bank reported its highest-ever quarterly profit after tax led by 17 percent YoY growth in loans and stronger margins, partly offset by elevated operating expenses.
Loan growth witnessed strong traction in retail credit, led by credit cards/MFI and new segments such as home loans, and tractors, HDFC Securities said.
The bank reported a beat in 4Q FY23 earnings due to lower provisions. Business growth saw healthy trends across segments. Margin expanded by 27 basis points QoQ to 5.01 percent aided by the utilisation of excess liquidity. Deposit growth was modest, though CASA saw a QoQ increase.
Asset quality further improved, with gross NPA ratio falling to 3.37 percent against 3.61 percent in the previous quarter and 4.40 percent in the year-ago period, it said.
Motilal Oswal Financial Services has marginally cut its earnings estimates to factor in higher operating expenses as the bank continues to invest in new areas of business and branch expansion.
Elevated credit costs, which will limit the expansion in return on asset, is another reason for trimming earnings estimate. These prompted the brokerage firm to downgrade its rating on the stock to “neutral” with a target price of Rs 185.
HDFC Securities also said that the lender continues to invest in franchise-building, which will keep operating expenses ratios elevated and drag the pace and extent of Return on Asset reflation.
“RBK (RBL Bank) is exploring ways to reflate its NIMs through a change in loan mix towards high yielding assets, and lower LCR; however, lagged deposit repricing is likely to cap any upside,” it said.
HDFC Securities has maintained its “reduce” rating on the stock with a revised target price of Rs 135.
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