RBL Bank's pre-tax profit declines 58% in Q4 over higher provisioning

Private sector lender RBL Bank on Thursday reported a 58 per cent decline in pre-tax profit for the quarter ending March, 2020 on account of higher provisioning for bad loans and Covid-19. In Q4FY20, the bank’s pre-tax profit stood at Rs 151 crore compared to Rs 360 crore in Q4FY19. The net profit of the bank also declined 54 per cent to Rs 114.36 crore from Rs 247.18 crore.

However, the bank saw a healthy growth of 37 per cent in its operating profit at Rs 765 crore compared to Rs 560 crore a year ago.

The net interest income (NII) of the bank rose 38 per cent in Q4FY20 to Rs 1,021 crore from Rs 739 crore in Q4FY19. The net interest margin (NIM) of the bank rose by 70 basis points to 4.93 per cent in Q4FY20 compared to 4.23 per cent in the same period a year ago.

Provisions and contingencies of the bank rose to Rs 614 crore in Q4FY20 as opposed to Rs 200 crore in the Q4FY19. The provisions made by the bank because of the Covid-10 amount to Rs 115 crore, which is well above Reserve Bank of India prescribed norms. The management said, nearly one-third of the bank’s borrowers opted for a moratorium. Nearly 13 per cent of the bank's credit card customers also opted for a moratorium.

The bank reported a provision coverage ratio (PCR) of 64 per cent in Q4FY20, significantly higher than PCR of 58 per cent in Q3FY19.

“Against this backdrop, we will continue to be cautious, conservative and focused on preservation of the franchise. As a Bank, we will look to maintain surplus liquidity high capital levels, tighten risk filters further to manage and improve credit quality, and balance sheet protection”, said Vishwavir Ahuja, MD & CEO, RBL Bank. The bank's management also said that the lender sees some stress emanating from the retail segment.

The bank’s gross non-performing assets (NPA) also shot up to 3.62 per cent at the end of Q4FY20 compared to 1.38 per cent at the end of March, 2019.  At the end of Q3FY19, the gross NPA was 3.33 per cent. The net NPAs ratio also moved up to 2.05 per cent at the end of Q4FY20 compared to 0.7 per cent at the end of Q4FY19. The slippage ratio fell to 1.19 per cent in the period under review as opposed to 1.79 per cent in Q3FY19.

The bank said that it has identified Covid-19 affected sectors and its total BBB-rated exposures to those sectors is 5.6 per cent of its loan book and total BB-rated exposure is 1.8 per cent of the book.

At the end of Q4FY20, the bank’s deposit base stood at Rs 57,812 crore, a decline of 1 per cent from Rs 58,394 crore a year ago. In Q4FY20, the bank lost 8 per cent of its deposit base, but the management said at the end of April, the bank recovered the deposits and the deposit base now stands at a little over Rs 60,000 crore.

The capital adequacy ratio of the bank stood at 16.45 per cent at the end of March, 2020, as against 13.46 per cent at the end of March, 2019.