RBL Bank - Improving Share Of Retail Asset, Liability Mix A Key Focus Area: Nirmal Bang

Nirmal Bang Report

Key Points

1. We hosted the top management of RBL Bank Ltd, in order to gain an insight into its current business outlook. The bank-maintained loan growth guidance of 20% for FY24, which will be driven by continued growth of 20-25% in credit card and micro finance institution segments and faster growth in seven new retail secured asset verticals it has added in the past few quarters. The share of wholesale book is expected to decline from 44% at present to 30-35% by FY26-end. According to management, all new businesses are expected to achieve breakeven and be return on asset positive by FY25-end.

2. Net interest margin is expected to be maintained at 5% in FY24 and improve to 5% plus thereafter due to improving business mix. On the deposit side, a major part of re-pricing has been done till Q1 FY24 and considering that 45% of the portfolio is on fixed rates, it should help protect NIM.

3. Due to the uneven nature of monsoon, there are no signs of stress visible yet in the MFI segment. In credit cards, the share of revolver credit, which had declined to 21% during Covid-19, is back to 23% at present.

4. Overall, we believe that RBL Bank is on an improving earnings growth trajectory, driven by healthy growth, margin expansion and stable asset quality. We expect the bank to achieve RoA/RoE of 1.2%/10.9% by FY25- end.

5. We maintain 'Buy' with a target price of Rs 270 (1 timee June-2025E adjusted book ).

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