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Centrum Broking
RBL Bank (Buy)
CMP: ₹523.10
Target: ₹600
RBL Bank, for Q4FY18, reported good results with decline in NPAs and healthy loan growth. Net interest income (NII) grew 42.1 per cent y-o-y to ₹500 crore on the back of advances growth of 36.7 per cent to ₹40,268 crore as on March 2018. NIM improved by 46 bps y-o-y and 9 bps q-o-q to 3.98 per cent. Pre-provisioning profit (PPP) grew 36.0 per cent despite an increase of 70 bps in the cost-income ratio at 52.8 per cent. Net profit grew 36.9 per cent to ₹178 crore. Overall business of the bank grew at a healthy pace of 31.4 per cent y-o-y to ₹84,170 crore as on March 31. Asset quality improved with gross and net NPAs declining 16 bps q-o-q to 1.40 per cent and by 19 bps q-o-q to 0.78 per cent, respectively, as on March 31.
View: In our last update (Q3FY18 on 30 Jan’18 @ ₹500) we had upgraded our rating to ‘Buy’ on the basis of improving numbers and comfortable valuations. The bank has consistently reported decline in NPAs on the back of improving recoveries across all segments and maintained its robust growth trajectory. This along with continued healthy business growth, provides future visibility on growth and improvement in return ratios — business CAGR of 37 per cent over FY18-20E, 1.47 per cent RoA and 17.8 per cent RoE by end FY20E. Considering the robust growth expectations, improving asset quality and comfortable valuations of 2.6x its FY20E ABV, we remain positive on the stock of RBL Bank, with a target price of ₹600.
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