Asset quality deterioration was on expected lines, and from pre-identified stressed pools. However, we remain cautious on RBK's asset quality for the following reasons (1) 3QFY20 saw a sharp ~Rs 7bn rise in BB and below rated corp loans, (2) Recent asset quality trends reflect poorly on underwriting and risk practices , and (3) Broader economic conditions. While the capital raise is a big positive and will support the bank's growth trajectory, it does not entirely mitigate the above risks. We maintain NEUTRAL. Yet again RBKs PPOP was better than expected, due to sharp NIM improvement and one-off staff cost reversals. PAT was above estimates, even as provisions remained elevated. Slippages remained high, and were mostly from anticipated stress. Maintain NEUTRAL with a TP of Rs 348 (1.5x Dec-21E ABV of Rs 232).

22 January 2020 RBK reported moderation in business growth, led by muted wholesale book; deposit growth stood flat sequentially. Slippages remained higher while elevated credit cost impacted earnings. Though operating performance remained strong (fees, NIMs and PPoP), elevated slippages trajectory and higher credit cost is likely to impact earnings in the near term. We cut our EPS estimates for FY20/FY21 by 17%/13%, primarily due to lower business growth and increase in our credit cost estimates given the higher slippages and decline in PCR ratio. NII grew 41% YoY to INR9.2b on 22bp QoQ expansion in margin to 4.6%. Core fee income grew 37% YoY, led by credit card fees, which constituted ~57% of total fees. PPoP growth, thus, remained strong at 47% YoY to INR7.3b. Loan growth moderated to 20% YoY, led by slowdown in the wholesale book, which grew 3% YoY (-4% QoQ) while strong growth in the retail book continued (+49% YoY).

The Bank offers specialized services under six business verticals namely: Corporate & Institutional Banking, Commercial Banking, Branch & Business Banking, Retail Assets, Development Banking and Financial Inclusion,...

Sector: Banking /Mid-Cap | Earnings Update 2QFY20 Background: RBL bank (RBL) came into operations in 1943 and was incorporated as a small, regional bank in Maharashtra with two branches in Kohlapur and Sangli. Post the change in the management team in 2010, it has been one among the fastest growing private sector banks and now has 346 interconnected branches and 394 interconnected ATMs spread across 24 Indian states and union territories serving ~7.3mn customers. The bank offers a comprehensive range of banking products and services customized to cater to the needs of large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low...

RBL Bank Ltd. is a fast-growing private sector bank with a network of 346 branches and over 7.3 million customers. It offers various services, including corporate and institutional banking, commercial banking, retail...

With the sharp rise in anticipated' stress (up ~80% in a quarter), we expect significantly higher credit costs ahead, denting RoAAs till FY21E. We find this trend rather alarming and asset quality seems perched on a slippery slope. Reflexivity will increasingly play out here, with the bank's future prospects being dependent on fund raise (not factored in our estimates). While a full blown implosion is not yet apparent to us, we are compelled to cut valuation multiple to 1.50x vs. 2.0 earlier. Maintain NEUTRAL with a TP of Rs 294 (1.50x Sep-21E ABV of Rs 196). Even as RBKs operating performance was better than expected, the near doubling of anticipated stress since 1QFY20 dampens near term recovery. With asset quality on a slippery slope, we reduce our target multiple to 1.50x from 2.0x. Maintain NEUTRAL with a TP of Rs 294 (1.50x Sept-21E ABV of Rs 196).

RBL Bank (RBL) reported 2QFY20 results with the key pointers being: (1) Gross slippages spiked to Rs 13.77bn of which Rs 8bn were accelerated slippages from corporate stress pool (2) Loan growth slowed to 27% YoY and core fee income growth also slowed to 19% YoY (3) NIM expansion journey continued with NIM at 4.35%, up 4 bps QoQ and 27 bps YoY (4) Opex growth was 41% YoY due to continued investment in retail franchise (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key P&L; items, RBL posted 6% YoY NII growth at Rs8,687mn, PPOP growth of 42% YoY at Rs6,358mn and PAT decline of 73% YoY at Rs543mn. We have revised our estimates for FY20/FY21/FY22 and...

22 October 2019 2QFY20 PAT was down 73% YoY to INR543m led by increased provisions of INR5.3b (+150% QoQ); the bank had made provisions of INR3.5b toward identified stressed accounts. For 1HFY20, PPOP was up 42% YoY to INR12.5b while PAT declined 19% YoY to INR3.2b. GNPL/NNPL increased 95%/145% QoQ to INR15.4b/INR9.1b led by elevated slippages of INR13.8b. The bank disclosed stressed pool of INR18b (earlier guided at INR9-10b), which includes four groups (a group based in the East, a diversified media group, a coffee group based in the South and a plastics group based in the West + a buffer), of which INR8b has slipped during the quarter while the remaining would be recognized in subsequent quarters. NII grew 46% YoY to INR8.7b, led by 4bp QoQ expansion in the margin to 4.35%. Core fee income moderated at 19% YoY (5% QoQ decline) to INR3.

We recently met Mr. Sameer Singh Jaini, CEO of The Digital Fifth and Ex-CTO of DCB Bank to glean incremental insight into fintech and digital strategy and how these are expected to impact the BFSI sector going forward. We share our takeaways below. Zero MDR rule does not apply to credit card businesses of banks Nil merchant discount rate (MDR) announced by the Finance Minister in the recent Budget speech is applicable only to debit card businesses of banks and not their credit card businesses. On being asked whether merchants would ask customers to pay using debit cards instead of credit cards going forward, the expert averred that, at the margin, this may happen to a limited...

RBL Bank Ltd. is a fast-growing private sector bank with a network of 332 branches and over 6.9 million customers. It offers various services, including corporate and institutional banking, commercial banking, retail...

We have cut earnings estimates for FY20/21E by 25/19% to factor higher slippages and consequent provisions. A fund raise is still possible, and will be crucial for RBL to provide for the upcoming stress and maintain growth rates. We are factoring Rs 35bn (at Rs 500/sh), pushing up est. ABVs by 27/20% over FY20/21E. Guidance on stress, and concentration commentary are red flags that underpin our DOWNGRADE to NEUTRAL. We value RBL at 2x Jun-21E ABV (vs. 3x earlier). Our TP is Rs 512. RBK ticked most boxes in 1QFY20, but guidance on asset quality (potential corporate slippages of Rs 10bn) is seriously disconcerting at the very least. DOWNGRADE to NEUTRAL. Sensitivity to asset quality outcomes is high.

RBL Bank (RBL) reported 1QFY20 results with the key pointers being: (1) RBL disclosed a stressed pool of corporate accounts worth ~Rs 9-10bn that is likely to result in elevated credit costs for FY20 (2) NIM expansion journey continues with NIM at 4.31%, up 8 bps QoQ and 27 bps YoY (3) C/I Ratio increased ~110 bps QoQ to 52.3% but management guided that the ratio would be contained between 51-52% for FY20 and (4) Core fee income jumped 42% YoY continuing to underline RBL as a fee income champion (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key P&L; items, RBL posted 48% YoY NII growth at Rs8,173mn, PPOP growth of 43% YoY at Rs6,188mn and PAT growth of 41% YoY at...

Sector: Banking /Mid-Cap | Earnings Update 1QFY20 Background: RBL bank (RBL) came into operations in 1943 and was incorporated as a small, regional bank in Maharashtra with two branches in Kohlapur and Sangli. Post the change in the management team in 2010, it has been one among the fastest growing private sector banks and now has 332 interconnected branches and 376 interconnected ATMs spread across 20 Indian states and union territories serving ~6.9mn customers. The bank offers a comprehensive range of banking products and services customized to cater to the needs of large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low...

20 July 2019 RBK reported 1QFY20 PAT at INR2.7b (41% YoY growth, inline) though the guidance on asset quality will drive elevated credit cost and impact earnings trajectory over the coming quarters. GNPA increased 4.6% QoQ to INR7.9b (1.4% of loans) while NNPA stood flat at INR3.7b enabling 230bp QoQ improvement in PCR to 52.9% (69.1% including TWO). NII grew 48% YoY to INR8.2b, led by 35% YoY growth in advances and 8bp QoQ expansion in the margin to 4.3%. Core fees increased 41% YoY (+5% QoQ) to INR4.1b, driven by credit cards (+66% YoY; ~47% of total fees). Loan book grew 35% YoY, led by strong growth in retail book (+62% YoY), while wholesale book grew 23% YoY.

Our recent interactions with RBK suggest less than commensurate credit risk, achieved via tight (and differentiated) credit policies. RBL Banks (RBK) focus on niche credit segments (credit cards and micro finance) gives it better spreads, system-beating growth and a multi-year addressable opportunity that enables it to outperform peers. Our positive stance is reflected in consistently robust operating metrics. RBKs scorching pace of growth along with its unconventional (but consciously chosen) evolution has invited skepticism. Maintain BUY with a TP of Rs 803 (3x FY21E ABV of Rs 268).

RBL Bank (RBL) reported 4QFY19 results with the key pointers being: (1) NIM expansion journey continues with NIM at 4.23%, up 11 bps QoQ despite high dependence on wholesale deposits (2) Underlying asset quality remains well under control with restructured book and SR book at 4 bps and 1 bp of loan book, respectively (3) C/I Ratio declined ~40 bps QoQ to 51.2% but it still elevated from an absolute perspective but this is due to continued investment programs. (4) Core fee income jumped 43% YoY continuing to underline RBL as a fee income champion (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key P&L; items, RBL posted 48% YoY NII growth at Rs7,387mn, PPOP growth of 46% YoY...

With an unblemished record, abundant opportunity and focus on high yielding granular credit segments, RBK will sustainably outperform peers on growth and margins. Op-lev and credit costs (esp. on the cards portfolio) are key monitorables, as they drive RoAA expansion hereon. With a book value-accretive fund raise in FY20, RBK can get capital to fuel its ambitious growth aspirations. Our opex (29% CAGR) and flattish NIM assumptions (3.9%) over FY19-21E provide upside risk to estimates. An all round 4Q show and an impending (book accretive) fund raise justify our positive stance on RBK. Maintain BUY with a TP of Rs 803 (3x Mar-21E ABV of Rs 268).

We reiterate RBL Bank as a BUY with a Price Target of INR 820 (2.8x

Maintain BUY with a TP of Rs 626 (3x Dec-20 ABV of Rs 208.5). Healthy loan (+35% YoY) and SA (+8% QoQ) growth, coupled with strong P/L performance characterised by rising NIMs (~4.12%, up for the 8th straight qtr), healthy fee income growth (+51%) driven by credit cards indicate a repeat of 2Qs performance. Asset quality was sequentially stable with continued improvement in coverage (63.2%, +180bps).