CITI has reiterated its Buy rating on RBL Bank and set a target price of ₹300, implying a 15% upside from the current market price of ₹260.70. The brokerage highlighted improving stress indicators and a likely recovery in margins as key positives from the bank’s recent performance.
According to CITI, Joint Liability Group (JLG) stress has started to subside, with improvements seen in slippages and the Special Mention Account (SMA) pool. However, the bank has prudently created a 1% contingency buffer to absorb any residual stress.
On the margin front, CITI noted that net interest margins (NIMs) appear to have bottomed out in Q1, and most of the yield repricing is now behind. With the cost of deposits (CoD) benefits expected to kick in, the bank aims to recover NIM to 4.8% by Q4, up from 4.5% currently.
However, the brokerage cautioned that credit card stress remains elevated, and a few high-value business banking accounts have turned delinquent. It also pointed to higher collection costs, which are impacting operating efficiency. Optimization measures are expected to begin delivering results from Q3 onwards.
CITI believes that while there are risks to monitor, the improving asset quality, margin rebound, and reasonable valuation support its positive outlook on RBL Bank.
Disclaimer: The brokerage view is based on publicly available research and does not constitute investment advice. Please consult a certified financial advisor before making any investment decisions.
