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Emkay Global Financial's research report on RBL Bank

RBL continued with its clean-up drive in Q4 as it fully provides for the MFI NPA portfolio leading to historically lower NNPA at 0.3%. However, the bank utilized its contingent provision buffer of Rs2.7bn which along with nearly flat margins and strong card fees helped manage profitability, albeit negligible at Rs0.7bn. Overall collection efficiency has improved in the MFI space, while SMA pool has reduced to Rs3.8bn/6.6% of the MFI book. RBL carries healthy provision on this SMA pool as well. Stress in the card portfolio too is easing, and the bank expects growth to recover gradually. The bank guides to better credit growth in FY26E, with heavy lifting to be done by the secured portfolio which may have some impact on margins. With CET 1 at 14.1% after the recent relaxation by the RBI on MFI risk-weights, RBL may not raise capital in a hurry.

Outlook

We retain BUY and our TP at Rs225, valuing the bank at 0.8x FY27E ABV. Further re-rating will be contingent on better visibility on its planned transformation toward the retail cum SME bank delivering sustained RoA/RoE of over 1%/10%.

For all recommendations report, click here

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RBK - 28042025 - emkay

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