RBL Bank bleeds 6% as analysts cut target on weak Q3; stocks hits 52-wk low

RBL Bank share price: Commercial banking company RBL Bank shares were in focus on Monday, January 20, 2025, as the scrip plunged as much as 5.86 per cent to hit an intraday low of Rs 146 apiece. 

 

However, at 9:55 AM, the RBL Bank shares recovered, and were trading merely 0.93 per cent lower at Rs 153.65. In comparison, BSE Sensex was trading 0.10 per cent lower at 76,696.99 levels.

 

The drop in RBL Bank share price came after brokerages slashed their target price following a weak set of results in the December quarter of financial year 2025 (Q3FY25).

 

Analysts at Emkay noted that RBL Bank has initiated a clean-up process in Q3 amid rising delinquencies in the microfinance portfolio, impacted by the MFIN guardrails and stress in the credit card portfolio. This, analysts believe, led to higher provisions and a PBT loss of Rs 190 crore, though the bank benefited from a tax reversal, resulting in a negligible PAT of Rs 30 crore. Emkay highlighted a month-on-month improvement in microfinance collection efficiency, expecting the stress to peak in Q4. 

 

Despite trimming FY25/26/27 earnings estimates by 33 per cent, 12 per cent, and 7 per cent, respectively, analysts retain a ‘Buy’ rating and lower the target price to Rs 225 (from Rs 250). They believe the stock remains undervalued at 0.5x Dec-26E ABV, and recommend it for long-term investors willing to trade near-term pain for future gains.

 

YES Securities, in a note, said that gross slippages have continued to rise from already high levels, though management has indicated that the peak has been reached and expects a downward glide path. Loan growth slowed to 13 per cent Y-o-Y, and management has stated that this growth rate will be maintained through the end of the financial year. 

 

Meanwhile, margins declined on a sequential basis due to interest reversals and an unfavourable loan mix evolution. Despite these challenges, YES Securities maintained its recently-assigned ‘Buy’ rating, but revised the price target to Rs 190 from Rs 200. They value the bank at 0.7x FY26 P/BV, based on an FY25/26/27E RoE profile of 4.5 per cent, 8.5 per cent, and 9.7 per cent, respectively.

 

On the other hand, reports suggested Nirmal Bang downgraded RBL Bank to ‘Sell’ from ‘Hold’ and cut the target price to Rs 144 (from Rs 172). They cite higher provisioning, increased slippages, and asset quality issues in microfinance and credit cards. Nirmal Bang estimates an 11.8 per cent loan CAGR over FY24-27E, with credit costs at 2.9 per cent. They lower PAT estimates by 39.6 per cent, 20.4 per cent, and 11.7 per cent for FY25E, FY26E, and FY27E, respectively, and highlight that the bank's valuation at 0.5x Dec'26E ABV is a 41.7 per cent discount to its 5-year P/ABV mean. They expect stock pressure due to moderating growth and stress in unsecured segments.

 

RBL Bank Q3 results

 

RBL Bank reported an 86 per cent year-on-year (Y-o-Y) decline in net profit to Rs 32.6 crore for Q3FY25, mainly due to a surge in provisions. Net Interest Income (NII) rose 3 per cent Y-o-Y to Rs 1,585 crore, driven by lower Joint Liability Group (JLG) funding and increased slippages.

 

Other income grew 38 per cent Y-o-Y to Rs 1,073 crore, which included a net gain of Rs 144.15 crore from the IPO of DAM Capital. 

 

Notably, Net interest margin (NIM) fell to 4.90 per cent from 5.52 per cent Y-o-Y. Provisions surged 159 per cent Y-o-Y to Rs 1,188.90 crore, up from Rs 618 crore in Q2 FY25. The bank made additional provisions of Rs 414 crore towards non-performing assets (NPAs) in the JLG segment. 

 

Gross NPAs stood at 2.92 per cent, slightly higher than 2.88 per cent in Q2, while net NPAs improved to 0.53 per cent from 0.79 per cent.

 

Advances grew 13 per cent Y-o-Y to Rs 90,412 crore, with a 16 per cent Y-o-Y increase in retail loans (60 per cent of the portfolio). Credit card advances grew 8 per cent, personal loans 5 per cent, business loans 30 per cent, and housing loans 33 per cent. Microfinance loans declined by 4 per cent. Wholesale advances grew 5 per cent Y-o-Y, while mid-corporates & SME commercial banking rose 21 per cent.

 

“We remain cautious about the short-term challenges emanating from the macro-economic environment affecting certain unsecured lending segments. We continue to demonstrate strong growth in chosen areas of secured retail & commercial banking on asset side and granular deposits on liability side. Our core business remains robust and disciplined, focused on growth with profitability and customer-centric approach continues to drive meaningful progress. Overall, we are happy to deliver yet another quarter of robust operating performance and growth in business,” said R Subramaniakumar, MD & CEO of RBL Bank.