RBL Bank stock fell over 11% in 4 days after Q3 print. should you buy

On BSEShares of RBL Bank closed at Rs. 150.60 on Friday, down 4.65%. The stock had touched an intraday low, falling at least 6.3% during the day 148.05 each.

Bank Market hat is around 9,029.18 crore by the end of 27 January.

The stock has been declining since the beginning of the week. Markets were closed on January 26 on account of the Republic Day holiday.

RBL Bank enters bearish tone after third quarter result,

In the December 2022 quarter, the private bank posted a net profit 208.97 crore grew by nearly 34% YoY, while Net Interest Income grew by 14% YoY 1,148 crores. Its Net Interest Margin increased to 4.74% during the latest quarter.

As on December 31, 2022, the bank’s gross NPA ratio stands at 3.61% as compared to 4.84% in Q3FY22. The net NPA ratio also improved to 1.18% in Q3 versus 1.85% in Q3FY22. Provisions declined by 31% year-on-year 292 crores.

Should you buy RBL Bank shares?

Ajit Kumar Kabi, analyst at LKP Securities, said in a research note, “The quarterly performance of RBL Bank is showing signs of recovery.”

According to LKP analyst, the key positive indicators are— e 1) GNPA (3.61%) went down sequentially by 19 bps driven by low slippage and steady upgrades and recoveries, 2) Restructured book (1.67% of GCA) also Decreased, with 13% coverage, 3) Provision expense ( 2.9 billion v/s 2.4 billion) stable sequentially; With a stable PCR of 68%. 4) Non-specialized PCR 73bps credit is at a satisfactory level, 5) NIMs improve by 19bps on the back of healthy YoA, 6) NII growth (13.6% YoY) is at par with credit growth (14.7% YoY).

However, Kabi’s note states that “there are negative PPOP de-growth because of higher operating expenses (C/I: 68%) led by card spend followed by branches and technology.”

Nevertheless, the bank’s latest business development strategy to accelerate card acquisitions will involve significant operating expenses, which is expected to keep profitability under pressure in the near- to medium-term, the brokerage report said.

On valuations, Kabi’s note said, “RBL Bank maintains a healthy position and 1) adequate provisions, 2) improving PCR, 3) healthy liquidity position with LCR of 136%, and 4) on growth path.” Showing signs of recovery from reversion. Thus, we recommend Buy rating on the bank with a target price of 222 (based on 0.8xFY24 price-adjusted book value).”

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.