Motilal Oswal's research report on RBL Bank
RBK reported a beat in 4QFY23 earnings, driven by lower provisions as the operating performance was in line with estimates. Business growth saw healthy trends across segments. Margin expanded by 27bp QoQ to 5.01%, aided by the utilization of excess liquidity. Deposit growth was modest, though CASA saw a QoQ increase. Fresh slippages increased to INR6.8b (4.5% annualized). However, higher recoveries and upgrades resulted in a 24bp/8bp QoQ improvement in GNPA/NNPA ratios to 3.4%/1.1%. PCR stood stable at ~68%. We marginally cut our earnings estimates to factor in higher opex and elevated credit costs (guidance of ~1.5% vs 29bp for 4Q23), which will limit the expansion in RoA.
Outlook
We thus estimate RBK to deliver FY25 RoA/RoE of 1.0%/9.5%. Downgrade our rating to Neutral with a TP of INR185 (premised on 0.8x Sep’24E ABV).
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