Emirates NBD infusion to lift RBL Bank's growth prospects: Motilal Oswal

RBL Bank is gearing up for a major expansion phase as the proposed $3-billion investment by Emirates NBD (ENBD) sets the stage for a material shift in its growth trajectory, according to a Motilal Oswal note dated December 9, 2025. 

 

The deal, which will give ENBD a 60 per cent promoter stake and raise it to 62 per cent post-share swap, is expected to meaningfully strengthen RBL Bank’s capital base, asset mix, liability profile and long-term profitability, analysts said.

 

Following the capital infusion, RBL Bank’s net worth is projected to rise to ₹42,000-44,500 crore, providing the headroom to scale existing businesses and build out new segments by leveraging ENBD’s global presence. The amalgamation of ENBD’s India operations into RBL Bank is set to offer a series of strategic advantages, including potential credit rating upgrades, lower funding costs, access to the GCC-India remittance corridor, and enhanced capabilities in corporate lending, treasury, wealth management and risk functions.

 

ENBD, backed 56 per cent by the Dubai government, is among the largest and most profitable GCC banks with consistent growth across domestic and international markets. In CY24, it delivered income of ₹97,000 crore and net profit of ₹50,600 crore, aided by strong loan growth, healthy fee income and disciplined cost management. Total assets grew 19 per cent year-on-year (Y-o-Y) to ₹26.4 trillion in CY25 year-to-date (Y-T-D), while its loan book stood at ₹15 trillion. Its prudent provisioning and robust operating momentum support RBL Bank’s outlook as the deal progresses.  ALSO READ | RBL Bank, Emirates NBD leaderships chart out post-investment road map 

For RBL Bank, the Motilal Oswal report noted a clear runway for margin improvement. The bank reported NIM of 4.51 per cent in Q2FY26 and expects a 10-15 basis-point sequential uptick through Q4FY26, supported by easing funding costs once the ENBD transaction is completed. The mix is also shifting toward higher-yielding segments such as SME and mid-corporate loans, secured retail products and gold loans. While a recent 25-bp repo cut could temporarily weigh on margins, NII is estimated to clock a strong 39 per cent CAGR over FY26-28E.

 

Loan growth remains healthy, with advances rising 14.4 per cent year-on-year (Y-o-Y) to ₹1 trillion in Q2FY26, despite a cautious stance on unsecured products. The bank has reduced its microfinance exposure to 5.9 per cent from a peak of 12.2 per cent, but plans to resume growth in the segment once conditions stabilise. New MSME offerings, growth in mid-corporate and secured loans, expansion in tractors and affordable housing, and deeper distribution reach are expected to support a 24 per cent CAGR in advances over FY26-28E. Management aims to lift its credit market share from 0.5 per cent to around 1 per cent over the medium term.

 

On liabilities, deposits grew 8.1 per cent Y-o-Y to ₹1.2 trillion, with CASA at 31.9 per cent. The CD ratio rose to 86.2 per cent as loan growth outpaced deposits, though liquidity remains comfortable with an LCR of 127 per cent. Motilal Oswal expects deposits to record a 19 per cent CAGR over FY26-28E, supported by expanding distribution, tech investments and a balanced retail deposit profile. The CD ratio is projected to climb to 96.6 per cent by FY28E, aided by strong post-transaction capitalisation, with CET-1 estimated at 35 per cent.  ALSO READ | Nuvama retains 'Buy' on Neuland Labs, sees CMS, peptide-driven growth 

RBL Bank’s C/I ratio remains elevated at 70.7 per cent due to investments in retail, digital and risk infrastructure, and lower treasury income in Q2FY26. As new businesses turn profitable and cross-selling, transaction banking and remittance flows improve, the ratio is expected to moderate to around 61 per cent by FY27E. This will enable a sharp 54 per cent CAGR in pre-provision operating profit over FY26–28E.

 

Asset quality trends are stabilising, particularly in the microfinance portfolio, where collection efficiency returned closer to normal levels in November 2025, analysts said. GNPA and NNPA ratios improved to 2.32 per cent and 0.57 per cent in Q2FY26, supported by aggressive provisioning, which kept PCR at 75.9 per cent. While stress in credit cards and personal loans remains elevated, early indicators such as SMA reductions and improved forward flows suggest further recovery. Credit cost is expected to ease to 1.6 per cent by FY27E from 1.85 per cent in FY26E.

 

Motilal Oswal expects RBL Bank’s profitability to improve meaningfully as the loan mix shifts toward secured assets and benefits from ENBD’s integration accrue. Net profit is projected to rise nearly fourfold over FY26-28E, with average RoA and RoE improving to around 1.5 per cent and 8.2 per cent. Therefore, the brokerage maintained a ‘Buy’ rating with a target price of ₹350, valuing the bank at 1.3x FY27E ABV.

 

Disclaimer: Target price and stock outlook has been suggested by Motilal Oswal. Views expressed are their own.