RBL Bank Ltd. share price target

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.

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).

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).

28 January 2019 RBL's 3QFY19 PAT was in line, increasing 36%/10% YoY/QoQ to INR2.25b growth and 4bp QoQ expansion in margins to 4.12%. During 9MFY19, PPoP grew by 46% YoY, while PAT grew 36% YoY. Core fees grew 50% YoY (100% YoY growth in card fees). Strong opex control enabled 50% YoY growth in PPoP while C/I ratio stood stable at 51.6%. Loan book grew 35% YoY led by strong growth in retail book (51% YoY). The share of retail loans increased 206bp QoQ to ~43%. CASA deposits increased 38.5% YoY (9.6% QoQ) led by robust 56% YoY increase in CA deposits. CASA ratio improved 60bp YoY to 24.6%.

The bank is planning to expand its MFI portfolio from the current nineteen states by adding two-to-three more states in the coming months, (b) Incremental growth is due to new customer addition (22% of its customers are new to credit), rather than an increase in the average ticket size. This is evident from the average ticket size, which currently stands at INR27K (nearly stable for large few years) whereas the maximum ticket size is capped at INR40K, (c) RBL Bank has deployed ~400 employees to man the BC branches to ensure proper checks and balances at the time of disbursing the MFI loans, (d) Management has guided MFI portfolio mix to improve to ~13%-15% (from current 9% levels) and (e) Management is building in ~1.5% credit cost in its MFI portfolio and is expected to build some contingent provisions (going forward) to counter event specific risks.

RBL Bank's asset quality continues to remain stable as Gross non-performing asset (NPA) ratio stood flat sequential at 1.4% and Net NPA ratio declined marginally by 1 bp QoQ to 0.7%. Provision coverage ratio (PCR) improved further by 104 bps QoQ to 61.5% on the back of higher provisions. Notably, as per the management the bank's exposure to IL&FS; group is just ~Rs15cr (0.03% of loan book) in the form of a corporate guarantee secured with 100% cash collateral. Further, exposure to NBFC and real estate is largely towards better-rated companies where the management indicated that the risk of default is quite low. We expect asset quality to continue to show broadly stable trend (Gross/Net NPA ratios of 1.5%/0.8% by FY20E) given the bank's...

Maintain BUY with TP of 618 (3xSept-20E ABV of Rs 206). RBKs 2Q was impressive with industry leading broad based growth (37%), strong fee traction (+61%), 7th consecutive qtr of sequential NIM (4.08%) improvement and stable asset quality (net stressed book at a mere 80bps). The sustained NIM uptick was on account of MCLR reset and increase in the share of the high yielding retail portfolio.

23 October 2018 RBL Bank Loan growth of 36.6% YoY was led by both non-wholesale (42.5% YoY) and wholesale (32.8% YoY) taking retail book share to 40.9% from 39.2% a year ago. Within the non-wholesale book, DB&FI; segment grew 37% YoY while retail book grew by 45.3%. Wholesale loans grew 32.8% YoY (8.6% QoQ), led by 35.5% YoY (9.8% QoQ) growth in the C&IB; segment and 27.2%YoY (5.9% QoQ) growth in the CB segment.

RBL Bank Ltd (RBL) is one of India's fastest growing private sector banks with an expanding presence across the country. The Bank offers specialized services under six business verticals namely: Corporate & Institutional Banking, Commercial Banking, Branch & Business Banking, Agri Business Banking, Development Banking and Financial Inclusion, Treasury & Financial Markets Operations. In the past five years, the bank has focused on building a comprehensive product suite, improving risk management, upgrading technology by implementing a new-age core banking system platform and expanding its distribution network. It currently services over 4.90 mn customers through a network of 266 Branches,...

23 August 2018 The credit card market in India is highly underpenetrated (2.3% of population as at FY17) in comparison to other countries like USA (300%), Korea (180%) and Brazil (70%). Moreover, credit card spends of USA, Korea and Brazil is significantly higher than India at 60x, 10x, and 4x, respectively. The increasing focus on digitalization, shift towards a cashless economy and increasing awareness is expected to drive and strengthen growth in the credit card segment over the medium term. We expect this pace to continue with MFI book growing at ~40% CAGR while credit card segment grows at ~60% CAGR over FY18-21E. RBLs share in the outstanding number of cards increased from a mere 0.9% in March 2017 to 2.1% in March 2018, and it currently ranks amongst the top 10 credit card players. With access to BAFs customer base (26.22m), strong focus and superior product proposition, we expect RBL to continue its dominance in gaining market share.

RBL Bank Ltd. (RBL) formerly known as Ratnakar Bank Ltd. is a Scheduled Commercial Bank (SCB) which came into operations in 1943 and was incorporated as a small, regional bank in Maharashtra with two branches in Kohlapur and Sangli. Presently, it is one of India's fastest growing private sector banks and offers a comprehensive range of banking products and services which are mainly categorized in five sectors: Corporate & Institutional Banking, Commercial...

RBL Bank is Indias fastest growing private sector bank (~59% loan CAGR over

Maintain BUY with a TP of Rs 584 (3x Mar-20E ABV of Rs 195). It was a quarter full of positives for RBK with robust loan growth (+36% YoY), steady asset quality (GNPAs flat at 1.7%) and superlative fee traction (+59% YoY), owing to cards. The steady uptrend in retail yields (+110bps YoY) drove up NIM to 4.04% (+50bps YoY), despite the continued pressure on corporate yields (-70bps YoY).

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 266 interconnected branches and 369 interconnected ATMs spread across 20 Indian states and union territories serving ~4.91mn 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)...