RBL Bank Ltd. share price target

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...

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).

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.