RBL Bank shares nosedive 14% post weak Q2 show; should you buy, sell or hold it?

RBL Bank shares in Monday's trade (October 21, 2024) tumbled over 14 per cent after the lender posted weak performance in September quarter. At the last count at around 10:06 am, shares of the bank traded weak by over 12 per cent or Rs 25.35 at Rs 180.1, while at day's low it hit levels of Rs 176.5 apiece on the BSE.

Net profit at the lender during the review period fell 24 per cent year-on-year (YoY) to Rs 223 crore on asset quality challenges emanating from credit card and microlending books.

In the year-ago period, RBL Bank reported a post-tax net profit of Rs 294 crore, and Rs 372 crore in the preceding June quarter. 

The net interest margin- a key profitability metric for financial institutions- narrowed to 5.04 per cent during the reporting quarter as against 5.54 per cent in the year-ago period, the bank official said, adding that it may take up to nine months more before it climbs back to the 5.4-5.5 per cent-mark.

The overall provisions shot up to Rs 618 crore as a result of the elevated stress in the asset quality, and the bank management guided towards an almost similar performance on the credit costs front in the third quarter.

Gross non-performing assets at the lender grew to 2.88 per cent of the total loan book as of the September quarter, while it was 2.69 per cent in Q2FY24. Similarly, NNPA soared to 0.79 per cent as against 0.74 per cent during the same period last year.

On the deposits front, the bank posted a 20 per cent growth and made it clear that attracting non-bulk and granular liabilities is the focus.

Here's how brokerages view RBL Bank stock after Q2FY25 show

Citi Bank suggested a 'buy' rating on the stock with a slashed target of Rs 255, implying 24 per cent gains from the previous close. According to the brokerage, elevated stress in credit cards & MFI led to significantly higher slippages at 4.7 per cent, credit cost at 2.8 per cent & NIM contraction of 40bps.  Despite Rs 1.1 billion treasury gain support, RoA/RoE of  less than 0.65 per cent/6 per cent much below the guided level leading to a sharp miss.