Emkay sees ENBD deal transforming RBL Bank; retains 'Buy,' raises target

RBL Bank's management indicated that regulatory approvals for the deal are expected by mid-Q4FY26

Private lender RBL Bank’s proposed strategic partnership with Emirates NBD (ENBD) could be a defining inflection point for the lender, according to Emkay Global Financial Services, which has reiterated its ‘Buy’ rating on the stock while raising the target price by 7 per cent to ₹375.

 

Emkay said it recently met RBL Bank’s MD & CEO R Subramaniakumar to assess progress on the ENBD transaction and the bank’s growth outlook following the anticipated capital infusion. Management indicated that regulatory approvals for the deal are expected by mid-Q4FY26. Once approvals are in place, ENBD is likely to launch an open offer at ₹280 per share, followed by a preference capital infusion, as previously outlined.

 

 

The bank views the ENBD investment as a “game-changer”, as it would considerably strengthen RBL’s balance sheet. Post-deal, RBL’s net worth could rise to around ₹45,000 crore, with CET-1 potentially climbing to as high as 39 per cent, depending on the extent of ENBD’s stake acquisition and capital raise. Emkay believes this would place the bank in a different league versus peers, enabling sharper scale-up in assets and liabilities through both organic and inorganic growth, while also unlocking new fee-income opportunities.

 

Management highlighted that a stronger capital base would improve RBL’s cost of funds, aided by a higher share of equity funding, better credit ratings and access to NRI deposit flows. This, in turn, could allow the bank to strategically rebalance its loan book towards mortgages and corporate lending, improving return on assets (RoA) and return on risk-weighted assets (RoRWA) over time. RBL is also expected to explore inorganic opportunities to further strengthen its liability-asset mix and accelerate RoE in the longer term.  CATCH STOCK MARKET LIVE UPDATES TODAY

A word of caution

 

In the near term, however, Emkay cautioned that recent and potential further rate cuts could pressure margins. While RBL has seen a strong rebound in credit growth during the second quarter and expects this momentum to continue, softer interest rates may weigh on net interest margins and delay the bank’s ability to achieve a sustained RoA run-rate of 1 per cent beyond Q4FY26. Elevated slippages could also persist in the short term due to the ongoing realignment of card collections, although customer acquisition growth is expected to turn positive from Q1FY27.

 

Factoring in these dynamics, Emkay has trimmed FY26 earnings estimates but raised FY27-FY28 earnings by about 8 per cent on expectations of stronger growth and profitability over the medium term. 

 

The brokerage noted that it has not yet factored in the potential upside from a post-deal surge in business volumes or RoA, as the transaction is still pending regulatory clearance, leaving room for further upside once the deal is completed.

 

  Disclaimer: The view/outlook has been suggested by Emkay. Views expressed are their own.