RBL Bank stock drops over 11% in four trading sessions after Q3 prints. Should you buy?


Mumbai-based private sector lender RBL Bank has been under pressure on stock exchanges throughout the current week’s trading sessions. From January 23rd to 27th, the stock dropped by more than 11% on BSE. On Friday alone, the stock tumbled by over 6% before correcting.

On BSE, RBL Bank stock ended at 150.60 apiece on Friday lower by 4.65%. The stock had plunged by at least 6.3% during the day by touching an intraday low of 148.05 apiece.

The bank’s market cap is around 9,029.18 crore by end of January 27th.

The stock has been falling since the start of the week. On January 26th, markets were closed due to the Republic Day holiday.

RBL Bank entered into a bearish tone post-Q3 results.

In the December 2022 quarter, the private bank posted a net profit of 208.97 crore up by nearly 34% YoY, while net interest income soared by 14% YoY to 1,148 crore. Its net interest margins expanded to 4.74% during the latest quarter.

As of December 31, 2022, the bank’s gross NPA ratio improved to 3.61% as compared to 4.84% in Q3FY22. Net NPA ratio also bettered to 1.18% in Q3 versus 1.85% in Q3FY22. Provisions dropped by 31% YoY to 292 crore.

Should you buy RBL Bank shares?

In a research note, Ajit Kumar Kabi analyst at LKP Securities said, “the quarterly performance of RBL bank is showing signs of recovery.”

According to the LKP analyst, the important positive pointers are — e 1) GNPA (3.61%) inched down sequentially by 19bps driven by lower slippages and stable upgrades and recoveries, 2) Restructured book (1.67% of GCA) also decreased, with 13% coverage, 3) Provision expenses ( 2.9 billion v/s 2.4 billion) stable sequentially; with stable PCR of 68%. 4) Non-specific PCR 73bps of loan is at a satisfactory level, 5) NIMs improvement of 19bps on the back of healthy YoA, 6) NII growth (13.6% YoY) at par with credit growth (14.7% YoY).

However, Kabi’s note added that “negatives are PPOP de-growth because of higher operating expenses (C/I: 68%) led by cards expenses followed by branches and technology.”

Nevertheless, the bank’s latest business growth strategy around ramping up cards acquisition will entail significant operating expenses, which is expected to keep profitability under pressure in the near-to-medium term, the brokerage report said.

On valuation, Kabi’s note said, “RBL Bank holds a healthy positioning and showing sign of recoveries by 1) adequate provisioning, 2) improved PCR, 3) healthy liquidity position with LCR of 136%, and 4) returning to a growth trajectory. Thus, we recommend a BUY rating on the bank with a target price of 222 (based on 0.8xFY24 Price to Adjusted Book Value).”


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Article Source:Money Control

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