Buy RBL Bank; target of Rs 350: Emkay Global Financial

Emkay Global Financial is bullish on RBL Bank has recommended buy rating on the stock with a target price of Rs 350 in its research report dated January 21, 2024.

Broker Research

January 22, 2024 / 15:41 IST

Buy

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Emkay Global Financial's research report on RBL Bank

RBL continued to report stable NIMs at 5.5%, but higher AIF provisions (Rs1.15bn) partly offset by lower tax incidence led to a 23% earnings miss, with PAT at Rs2.3bn/0.7% RoA. However, the management contends that none of the bank’s AIF investments that have been done over the past 10 years are of the nature of ever greening of NPAs. These investments are in-the-money and will have natural redemption at beginning-4Q, apart from sell-off by the bank. Though headline GNPA ratio remained largely flat at 3.1%, the bank reported slightly higher slippages (3.3% of loans) mainly due to stress in Cards/MFI. Thus, Bank has been proactively building contingent provisions (1% on Cards + MFI), which it plans to further shore-up over FY24-26E. Factoring-in the one-off AIF hit and some growth moderation, we cut FY24E earnings by 9%, while retaining estimates for FY25-26E.

Outlook

We expect the bank to deliver 1-1.4% RoA/8-14% RoE over FY24-26E, while the recent retirement of the RBI nominee director from the bank’s Board eases regulatory concerns. We retain BUY on RBL with TP of Rs350, implying 1.2x Dec-25E ABV.

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