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RBL Bank improves asset quality but stock falls post Q1 result
The shares of private sector bank RBL Bank fell sharply in early trade after weak earnings for the quarter ended June, even as the lender showed no new strain in asset quality post the appointment of a new chief executive officer.
RBL Bank appointed R Subramaniakumar as its new chief executive in June, which led analysts to fear possible increase in bad loans as he looks to put the struggling lender’s house in order, a process known as 'kitchen sinking' in market circles.
However, RBL Bank reported improvement in asset quality for the June quarter as gross non-performing assets ratio improved to 4.08 percent from 4.4 percent in the previous quarter. Similarly, net NPA ratio came in at 1.16 percent as compared to 1.34 percent in the March quarter.
That said, some stress was visible in the form of increase in slippages to Rs 653 core in the reported quarter from Rs 619 crore in the previous quarter.
Brokerage firm retained its underperform rating on the stock but slashed its price target to Rs 86 from Rs 95 earlier in wake of the overall weakness in earnings.
While RBL Bank reported a better-than-expected net profit of Rs 201 crore for the reported quarter as against net loss of Rs 459.5 crore in the year-ago quarter, its growth metrics were subdued.
Net interest income grew merely 6 percent to Rs 1,027.7 crore, which was below analysts’ expectations. Advances or loan grew merely 0.4 percent sequentially, and 6.6 percent on-year, to Rs 60,270 crore. Deposit growth of the lender also lagged behind peers as it grew 0.3 percent on-quarter, and 6.4 percent on-year, to Rs 79,216 crore.
Loan growth in the reported quarter was likely impacted by the retail loan portfolio, which has declined for the second consecutive quarter in Q1.
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