RBL Bank falls 2% as Q3 slippages increase; analysts remain positive

While maintaining buy call on the stock, Deutsche Bank said overall, it likes business momentum in Cards and MFI and expects margin to improve further

RBL Bank shares fell nearly 4 percent in the morning on January 29 after the increase in provisions on higher slippages for December quarter, but analysts remained positive on the stock.

The was in addition to a 2 percent decline on January 29.

The stock was quoting at Rs 550.95, down Rs 12.75, or 2.26 percent on the BSE at 1028 hours IST.

The investment bank, Citi, raised its price target on the stock to Rs 585 from Rs 520 apiece. It also increased FY19 PAT estimates after the third quarter earnings.

Earnings missed estimates due to higher provisions on the back of higher slippages, but its cards business return on assets continued to be better than that of the overall bank, the research house said.

The private sector lender has been making good progress on cards and fees business but cost ratio remains elevated, it added.

While maintaining buy call on the stock, Deutsche Bank said overall, it likes business momentum in Cards and MFI and expects margin to improve further.

Motilal Oswal also maintained its buy rating on the stock and revised price target to Rs 650 as it expects stable/improving margins, led by an improving asset mix and continued asset re-pricing.

RBL Bank's profit increased 36 percent YoY to Rs 225 crore in Q3FY19 and net interest income grew 40 percent YoY to Rs 650 crore, led by 35 percent YoY advances growth and 4bp QoQ expansion in margins to 4.12 percent.

Core fees during the quarter grew 50 percent YoY (100 percent YoY growth in card fees). Loan book growth was led by strong growth in retail book (+51 percent YoY and is 43 percent of total book).

With a diverse product portfolio, a rising share of high-yielding loans and capable management, RBL is estimated to report industry-leading loan CAGR of 35 percent over FY18-21, Motilal Oswal said.

The research house expects stable/improving margins on improving asset mix and continued asset re-pricing, whereas operating leverage is likely to improve gradually.

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