CLSA has retained its Hold rating on RBL Bank with a target price of ₹260, suggesting limited upside from the current market price of ₹260.70. The brokerage cited weak operating performance in Q1FY26, with some relief coming from treasury gains and stable credit costs.
Pre-provision operating profit (PPOP) for the quarter was 16% below estimates, largely due to lower net interest income (NII) and higher operating expenses. While credit costs came in better than expected, the bank still reported a 13% miss on PAT, reflecting the broader pressure on earnings.
Asset quality concerns continued, with the gross slippage ratio elevated at 4.6%, and overall slippage ratio rising 70 basis points sequentially to 4%. However, loan and deposit growth were in line, both rising around 10% year-on-year.
Margins were also under pressure, with net interest margin (NIM) falling 40 basis points QoQ to 4.5%, though management believes NIMs have now bottomed. CLSA noted a positive step in cost rationalization, as RBL cut its weighted average savings account rate by 100 basis points, with term deposit rates likely to reprice downward gradually, which could support margin stabilization in the coming quarters.
Despite these marginal improvements, CLSA remains cautious on the stock, citing persistently high slippages and subdued profitability.
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.
