Should you buy, sell or hold RBL Bank shares after lender posts strong Q2 business update?

RBL Bank shares surged to touch a 52-week high on Thursday after the private sector lender said its retail advances rose 34 per cent on a year-on-year basis in the quarter ended September 30, 2023. The RBL Bank stock gained by as much as Rs 7.2, or 2.9 per cent, to Rs 256.6 apiece on BSE, surpassing an earlier 52-week peak scaled this week. 

However, the stock gave in to selling pressure later in the day. At 1:30 pm, RBL Bank shares were down 2.2 per cent at Rs 244 apiece on the bourse.

In a strong update for the first quarter of the current financial year, released post-market hours on Wednesday, RBL Bank reported growth to the tune of seven per cent on a year-on-year basis in wholesale advances.

RBL Bank said it expects to maintain the improving trend across key performance parameters in the second half of the financial year, supported by a gradual pickup in volume and topline growth in the domestic business and healthy momentum in the international business. The lender said its full-year guidance for margin remains intact.

RBL Bank maintained its aspiration of delivering sustainable and profitable volume-led growth over the medium term, enabled by the strengthening brand equity of its core franchises and the scale-up of new engines of growth. "Within wholesale advances, commercial banking grew 17 per cent YoY and 11 per cent sequentially. The mix of retail and wholesale advances was approximately 58:42," the bank said.

It also mentioned its continuous focus on granular retail deposits in the overall deposit mix, with retail deposits at approximately 44.2 per cent as of September 30, 2023, as against 42.0 per cent as of September 30, 2022. The private lender's current and savings account (CASA) improved 12 per cent on a year-on-year basis to Rs 32,075 crore.

The CASA ratio remained steady and stood at 35.7 per cent. A higher CASA ratio—which determines the ratio of current accounts and savings accounts in total deposits—implies a lower cost of funds. 

Earlier in the day, Zee Business Managing Editor Anil Singhvi gave a 'buy' call on RBL Bank shares for targets of Rs 255, Rs 258 and Rs 260 with a stop loss at Rs 247.  

Should you buy, hold or sell RBL Bank shares?

Morgan Stanley maintained an 'underweight' rating after the development with a price target of Rs 210 for the stock. The brokerage's target implies a potential downside of 15.8 per cent in the stock from Wednesday's close.

At the end of September, the bank informed the bourses that CARE Ratings had reaffirmed its credit rating of 'AA-' with a 'stable' outlook for its Tier II bonds.

RBL Bank shares: Past performance

RBL Bank shares have more than doubled in the past one year, sharply outperforming a gain of nearly 13 per cent in the Nifty Bank index.