Investec has initiated coverage on RBL Bank with a buy rating and a target price of ₹430, implying an upside of around 42% from the current market price of ₹302.90. The brokerage’s positive stance follows a recent management interaction, which highlighted improving balance sheet strength, funding cost relief and a stronger growth outlook.
According to Investec, RBL Bank’s management plans to deploy $1.5 billion out of the $3 billion capital infusion towards retiring high-cost liabilities. This is expected to support potential credit rating upgrades from AA- to AA+/AAA, which could significantly narrow the wholesale funding cost gap between RBL Bank and larger peers. The brokerage believes this step will be a key catalyst in improving the bank’s profitability profile over the medium term.
On the growth front, management has guided for loan growth of around 30% in FY27, driven by wholesale lending, prime housing loans and a recovery in unsecured retail segments. Investec expects this diversified growth mix, along with a rising share of secured assets, to support healthier balance sheet expansion.
The brokerage also addressed the impact of the new Expected Credit Loss (ECL) norms, which come into effect from April 2027. Management expects a one-time impact of ₹15–17 billion, equivalent to about 4% of post-dilution net worth, along with a 20–25 basis point increase in credit costs on a run-rate basis. However, this is likely to be partly offset by faster growth in secured lending, which carries lower risk weights.
Looking ahead, Investec projects RBL Bank to deliver a 27% loan CAGR and 44% PAT CAGR over FY26–FY28E, with FY27E RoA estimated at 1.4%. At around 1x FY27E price-to-book value, the brokerage believes the stock offers a reasonable margin of safety, underpinning its buy recommendation.
Disclaimer: This article is for informational purposes only. The views expressed are those of the brokerage and do not constitute investment advice or a recommendation to buy or sell any security.
