We maintain our REDUCE rating with a TP of Rs 136, as we believe that RBK faces challenges on both sides of the b/s- potential stress from high unsecured loan exposure and a weak deposit franchise. Key takes from RBKs FY20 AR are as follows: (1) The share of top 20 depositors increased 40bps to 18.8% despite the ~1% (and ~8.1% QoQ in 4QFY20) fall in overall deposits. AR commentary indicates that the bank continues to focus on bulk deposits. (2) The bank appeared to have made some progress on asset-side granularity and this appears to be the focus, which is desirable in context of FY20 asset quality trends. (3) Borrowings from institutions and agencies and the RBI contributed to a majority of incremental borrowings, and overall borrowings grew at ~4x total assets. (4) Segment-wise asset quality data was in line with expectations. These disclosures concur with our stance on the bank.

RBL Bank Ltd. is a fast-growing private sector bank with a network of 386 branches and over 8.5 million customers. It offers various services, including corporate and institutional banking, commercial banking, retail...

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 386 interconnected branches and 389 interconnected ATMs spread across 24 Indian states and union territories serving ~8.4mn 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 income) customers. Loan book of the bank grew at a CAGR of 46% over FY11 to FY20 and stood at...

Despite the sharp correction over a period, we maintain our REDUCE rating (TP of Rs 136, (0.6x Mar-22E ABV)), given elevated risks and sub-par expected return ratios. RBKs 4Q earnings were higher vs. estimates on a/c of sharper than expected margin expansion (not sustainable) and lower than expected LLPs (elevated nevertheless, to persist). B/s growth was constrained as deposits dipped 8% QoQ. RBK faces challenges on both sides of the b/s- potential stress from high unsecured loan exposure and a weak deposit franchise

RBL Bank has reported a better-than-expected result on the operational front, beating our NII and PPOP estimates by 9% and 12%, respectively. The deviation from our estimates was almost entirely on account of an all-time high NIM of 4.93% for the quarter, expanding by 70bps YoY/36bps QoQ. Noninterest income was impacted to the extent of Rs150mn due to the lockdown. Opex grew by 28.7% YoY/11.7% QoQ. Operating profit for the quarter was up 36.6% YoY/4.5% QoQ, driven by 38.2% YoY/10.7% QoQ growth in NII. Loan book growth decelerated to 6.8% YoY, while on a sequential basis, it was down 2.7%. The loan book movement was largely a function of the planned portfolio recalibration (de-bulking of wholesale book). On the liabilities front, deposits have now stabilized post witnessing some decline in Mar'20. LCR remained comfortable, averaging 164% during 4QFY20 and...

RBL Bank's (RBK) Q4FY20 PAT at Rs 1.1bn (54% YoY) was ahead of estimates due to an NII beat.

7 May 2020 RBK reported weak business trends, weighed by decline in wholesale assets and deposit outflows. Higher provisions impacted earnings, but slippages moderated on a sequential basis, enabling improvement in the coverage ratio. Asset quality is expected to remain under watch as 33% of the loan book availed moratorium, with management guiding for elevated credit costs in credit cards/MFI/MSME portfolio. We cut our PAT estimate for FY21/FY22 by 6%/5%, primarily as we factor in moderation in fee income, led by reduced economic activity / lockdown. 4QFY20 PAT stood at ~INR1.1b (54% YoY decline), affected by higher provisions of INR6.1b. NII grew 38% YoY to INR10.2b, led by 36bp QoQ margin expansion to ~4.9%. Other income increased 22% YoY to INR5.0b, with core fee income growth of 21% YoY, impacted by lockdown. Overall, PPoP growth remains strong at 37% YoY to INR7.6b. In FY20, NII/PPOP rose at 43%/42% YoY, while PAT declined 42% YoY, affected by high provisions.

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).

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 383 interconnected ATMs spread across 24 Indian states and union territories serving ~7.8mn 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 income) customers. Loan book of the bank grew at a CAGR of 52% over FY11 to FY19 and stood at INR 596bn as of 3QFY20...

RBL Bank (RBL) reported 3QFY20 results with the key pointers being: (1) Gross slippages continued to be elevated at Rs10.48bn of which Rs7bn were from the identified corporate stress pool (2) Loan growth slowed to 20% YoY while core fee income growth was better at 37% YoY (3) NIM expansion journey continued with NIM at 4.57%, up 22 bps QoQ and 45 bps YoY (4) Cost to income ratio was lower 351bps YoY and 341bps QoQ at 48.1% on account of cost saving initiatives and one offs (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key P&L; items, RBL posted 41% YoY NII growth at Rs9,227mn, PPOP growth of 47% YoY at Rs7,322mn and PAT decline of 69% YoY at Rs700mn. We have revised our estimates for...

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.