RBL Bank Ltd. share price target

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)...

improvement of 20bp QoQ to 3.7%, driven partly by a reduction in cost of funds from CASA inflows and partly by capital from QIP. Absolute GNPAs increased 6% QoQ (+77% YoY) to 1.44% of loans (-2bp QoQ). Sequential decline in asset quality was caused by a 30%/20% increase in DB&FI;/BBB portfolios, where GNPA ratios stood at 2.81%/1.49% (+42bp/+8bp QoQ), while asset quality in Commercial Banking improved with a decline in GNPA to 2% from 2.6% in the earlier quarter. Loan growth was led by non-wholesale book growth of 41% YoY, increasing...

Net interest income (NII) increased at a robust pace of 55% YoY (in line with our expectation) on account of 69 bps YoY improvement in net interest margin (NIM) to 3.5% coupled with strong growth in advances. Other income grew by 53% YoY on the back of stellar growth in treasury (178% YoY) and distribution fees (158% YoY). Net profit grew at a slightly slower than expected pace of 45% YoY mainly due to 122% YoY increase in provisions owing to higher slippages from the micro finance institutions (MFI) portfolio. Going forward, we expect net profit to increase at a CAGR of 44% over FY17-19E led by better operating efficiency coupled with stable margin. Marginal hiccups in asset quality...

RBL Bank (RBL) continued its dominant show, reporting ~45% YoY PAT growth to Rs 1.4 bn (marginally higher than our estimate). Operating metrics were strong: 40%/37% growth in advances/deposits, sequentially resilient NIM (3.5%) and stable CASA ratio at 22%. However, headline asset quality witnessed ..

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 244 interconnected branches and 387 interconnected ATMs spread across 16 Indian states and union territories serving ~3.15mn 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 58% over FY11-17 and stands at INR 311bn...

BUY RBL Bank Ltd at CMP Rs. 381 and add on dips to band Rs. 352 - 381 for the target of Rs. 470

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 197 interconnected branches and 362 interconnected ATMs spread across 16 Indian states and union territories serving ~1.9mn 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 income) customers. Loan book of the bank grew at a CAGR of 62% over FY11-16 and as of FY16 stands...