Comments
Narnolia Financial
RBL Bank (Buy)
CMP: ₹680.6
Target: ₹834
RBL Bank’s NII (net interest income) has shown strong traction led by NIM (net interest margin) expansion and healthy loan growth. MCLR reset at higher rate and change in asset mix has led major improvement in NIM. Management is confident of maintaining NIM going forward. Operating expenses is expected to remain elevated in line with management strategy of expansion and digitalisation. Agriculture and MFI portfolio continues to give pain whereas credit cost in card business still remains elevated.
Improvement of assets quality in retail segment is still awaited which will drive the credit cost to be lower. Advances growth is likely to maintain strong growth ahead. Led by higher credit cost, RBL Bank is unlikely to achieve its 1.5 per cent RoA target for FY20. We reduce our PAT estimate for FY20 by 4 per cent. Board has approved the equity dilution plan up to ₹3,500 subject to shareholders’ approval. We roll over our target price on FY21 estimates and recommend ‘buy’ with the target of ₹834.
Key risks to our rating and target: a) Further loan waiver and poor monsoon will impact the assets quality; b) Higher than expected opex will depress the profitability.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.