RBL Bank climbs 5%, nears 52-week high as D-Street cheers good Q2 show

Shares of the private sector lender RBL Bank on Monday (October 23, 2023) zoomed 4.7 per cent to Rs 255.1, nearing its 52-week high of Rs 256.6. The sharp gains in the stock were triggered by the lender's quarterly results for the July-September period that were largely in line with Street estimates. 

Net profit at the private banking major grew 46 per cent year-on-year basis to Rs 294 crore for the second quarter of the current financial year. The figure stood at Rs 201.55 crore for the corresponding period a year ago. The increase in the profit at the lender has been reported despite an increase in provisions by 2.65 times YoY during the period under review to Rs 640.4 crore. 

However, provisions for the quarter rose 2.65 times from a year earlier to Rs 640.4 crore.

Further, during the September ended quarter, NII or net interest income also logged an increase of nearly 26 per cent to Rs 1,475 crore. 

On the asset quality front, GNPA or gross net performing asset ratio during the review period fell 10 basis points quarter-on-quarter (QoQ) to 3.12 per cent, while net NPA ratio too saw a decline by 22 bps sequentially to 0.78 per cent.

The lender reportedly has logged the best asset quality and return ratios in 16 quarters. 

The stock in the last year has gained 88 per cent and advanced 10 per cent in the last quarter alone. The stock's 52-week high and low prices are Rs 119.5 and Rs 256.7 per share, respectively.

According to data from stock research portal Trendlyne, the consensus recommendation on the counter from 16 analysts is a sell, with only three suggesting a strong 'buy' on the stock.

Brokerage views

Domestic brokerage Motilal Oswal Financial Services has reiterated its 'neutral' rating on the stock and revised the target price to Rs 265. This implies potential gains of around 9 per cent from the last close.

The brokerage is of the view that the lender has reported a steady improvement in asset quality along with a decline in its restructured book, which bodes well for incremental outlook on asset quality

“The bank benefitted from a tax reversal of Rs 220 crore, which it prudently utilised to make a contingency provision of 1 per cent on its credit card and Microfinance advances (Rs 250 crore ) and also in tightening the provisioning policy on overdue loans in credit cards (Rs 48 crore),” said the brokerage in its report.

Foreign brokerage JP Morgan has upgraded the counter from 'neutral' to 'underweight' and raised the target to Rs 270 from the earlier Rs 175.

Morgan Stanley, on the other hand, has maintained an 'underweight' rating on the counter, and revised its target price to Rs 245 from the earlier Rs 210.

Brokerage firm Citi is bearish on the stock of RBL Bank and has given a 'sell' recommendation, while raising the target price to Rs 222 from the earlier Rs 207.

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