RBL Bank Ltd. share price target

Maintain BUY with a TP of Rs 582 (3x Mar-20E ABV of Rs 194). RBL Bank (RBK) delivered across parameters, again. Best-in-class growth (+37% YoY) and robust fees (+33%) drove net earnings (~Rs 1.8bn, +37% YoY). NIM jumped for the 8th successive quarter, just shy of 4% (up 46/9bps YoY/QoQ) with the retail thrust.

RBL's 4QFY18 PAT rose 8%/37% QoQ/YoY to INR1.78b (in-line). NII grew 42% YoY to INR5b, led by 37% YoY advances growth and 48bp YoY NIM expansion to 3.98%. Opex growth trailed income growth sequentially (CI ratio of 52.8% v/s 54% in 3Q), leading to PPoP growth of 15%/36% QoQ/YoY. Key positives were: a) loan growth of 9% QoQ and 37% YoY, b) fee income growth of 32% YoY, driven by 167% YoY growth in distribution/CC fees and c) reported NIM expansion of 9bp QoQ to 3.98%, with improvement in spreads. Asset quality improved, with absolute GNPA declining 2% QoQ (1.4% of loans, -16bp QoQ). Sequential improvement in asset quality was due to controlled slippages (INR1.15b, 1.6% annualized) and upgrade of an INR525m agri account, which had slipped in 3Q

Initiate coverage with a BUY. Our TP of Rs 573 is based on a 3x Mar-20 ABV of Rs 191. RBL Bank (RBK) is Indias fastest growing private sector bank (~59% loan CAGR over FY10-17). It is adequately diversified across geographies and has a reasonable fix on asset quality. Beyond its corporate focus, RBK has selectively ventured into retail segments with high growth potential. With a well capitalised B/S, RBK is set to make the most of receding competition from corporate lenders (esp. PSUs)

We met with the senior management of RBL and came back confident on its outlook and execution capabilities. Growth rates to remain healthy with benefits flowing from multi-channel distribution network. NIM to remain intact with granular retail franchise.

RBL Bank Ltd Q3FY18 results comment NII grew to Rs. 467.29 Cr in Q3FY18 compared to Rs. 420.16 Cr in Q2FY18. NII grew by 45.31% ( Rs. 145.71 Cr ) when compared with the same period last year

RBL Bank's (RBL) Q3 PAT at Rs 1.7 bn (up 28% YoY) was in line with our estimate driven by strong loan growth and uptick in margin. Loan growth remained strong at 38% YoY with 43%/35% YoY growth in retail/wholesale segments.

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 246 interconnected branches and 394 interconnected ATMs spread across 20 Indian states and union territories serving ~3.98mn 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 62% over FY11 to 9MFY18 and stands at INR 369 bn as of 3QFY18 with a deposit base of INR 386bn....

RBL's 3QFY18 PAT increased 28% YoY to INR1.65b, below our estimate by10%, mainly due to opex missing estimates by 9% (retail expansion costs)and higher provisions (as the bank provided INR500m toward MFI book, out of total provisions of INR823m), despite NII (INR4.7b; +11%/+45% QoQ/YoY)exceeding estimate by 5%. Key positives were: a) loan growth of 10% QoQ and 38% YoY, b) fee income growth of 50% YoY, driven by 183% growth in distribution/CC fees and c) margin improvement of 15bp QoQ to 3.89%,driven partly by a reduction in cost of funds from CASA inflows and partly by an increase in the CD ratio.

RBL Bank reported a healthy Q2FY18 marked by strong 35% YoY loan growth, 20 bps QoQ improvement in margin at 3.7%, 160 bps uptick in CASA ratio at 23.7% and largely stable headline asset quality (GNPAs at 1.44% vs. 1.46% in Q1FY18).

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 246 interconnected branches and 388 interconnected ATMs spread across 18 Indian states and union territories serving ~3.54mn 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)...