RBL Bank - Q4FY21 Result Update - YES Securities

Posted On : 2021-05-05 10:21:27( TIMEZONE : IST )

RBL Bank - Q4FY21 Result Update - YES Securities

Result Highlights

- RBK's earnings stayed under pressure in Q4 FY21, impacted by lower NII (depressed NIM) and higher provisioning.

- Advances grew by 4% qoq, after having de-grown in 9m FY21, aided by healthy growth in corporate portfolio and strong traction in microfinance (12% of Adv.), housing loans and agri lending in retail segment.

- Credit cards (21%) and business loans (18%) portfolios were flat. Higher interest reversals, refund of interest on interest and portfolio mix shift (by products and risk rating) were key NIM headwinds in Q4; however, there was no sharp fall in margin owing to a significant correction in cost of funds due to reduction in rates and better CASA levels.

- On expected lines, NPL addition was elevated in Q4 (annualized 10% slippage ratio) and bulk of it came from retail products (mainly Cards, MFI, BLs and PLs). Higher reductions and write-offs ensured a decline in Gross NPLs and accelerated provisioning pulled down Net NPLs on sequential basis (core PCR was lifted to 52%).

Our view - Pressure on profitability to persist for a while: Residual impact (provisioning/write-off) of the first wave and incremental stress (though limited this time) from second wave of the pandemic is likely to sustain pressure on growth and profitability in the near term.

The bank is not carrying any contingency provisions like peers; however, it is well capitalized with Tier-1 ratio of 16.6%. If the pandemic is short-lived, then H2 FY22 can be starkly different from H1 given higher share of high beta businesses in RBK.

We believe undemanding valuation (post recent sharp price correction) at 0.8x FY23 P/ABV discounts a non-exciting near-term but does not capture a certain recovery in growth and RoA over the medium term. We retain BUY, but have lowered 12m PT to Rs235.

Shares of RBL Bank Ltd was last trading in BSE at Rs.181.75 as compared to the previous close of Rs. 181.1. The total number of shares traded during the day was 1109261 in over 7413 trades.

The stock hit an intraday high of Rs. 188.45 and intraday low of 180. The net turnover during the day was Rs. 204366291.

Source : Equity Bulls