Emkay Global Financial' research report onRBL Bank
RBL’s 2Q PAT stood at Rs4.8bn/ROA at 0.9%, which is 4% below our estimates largely due to higher provisions (32% above our estimate). However, the bank continues to report accelerated growth driven by broad-based growth along with FCNR B leverage, while its cards portfolio is muted. RBL carries surplus liquidity, which it plans to deploy into wholesale and secured retail lending. Margins are expected to moderate in 3QFY27 due to the full-quarter impact of FCNR(B)-led leverage and surplus funds parked in lower-yielding assets, and partly offset by repo rate hike benefits, before recovering gradually in 4QFY27. Asset quality continued to improve, with gross slippages at 2.5% ofloans,albeit still elevated. So far, the management has not seen any stress from the rural business or the Middle East conflict, although it remains watchful.
However, the management expects card slippages to stabilize at ~Rs4bn in 3Q/4QFY27. We tweak our earnings estimates and retain BUY on RBL, while raising TP by 10.5% to Rs475 from Rs430 (roll forward to 1.6x Sep-28E ABV).
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