Brokerages remain divided on RBL Bank following its Q1FY26 performance, which was marked by elevated slippages and a sharp NIM decline, but also better-than-expected credit cost control. While CITI and IIFL maintain bullish calls, CLSA remains on the sidelines, flagging operational weakness and high slippage ratios.
CITI – Buy | Target: ₹300 | Upside: 15%
CITI maintained its Buy rating, projecting a 15% upside from the current market price of ₹260.70. It noted that Joint Liability Group (JLG) stress has subsided, with improved slippage metrics and prudent provisioning through a 1% contingency buffer.
Importantly, the bank management believes NIMs have bottomed out in Q1 at 4.5% and aims to restore them to 4.8% by Q4FY26, aided by yield repricing tapering off and cost of deposits (CoD) benefits flowing through.
However, the brokerage flagged elevated credit card stress and delinquencies in a few large business banking accounts as key areas to monitor. It also noted that collection costs remain high, but expects efficiency improvements from Q3 onwards.
IIFL – Buy | Target: ₹300 | Upside: 15%
IIFL raised its target and maintained a Buy call, seeing room for margin and RoA expansion. Despite a 3% miss on PPOP, lower provisioning helped deliver an 18% PAT beat (13% ahead of consensus).
The brokerage expects:
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Credit costs to improve to 1.8% in FY26 from 3.3% last year.
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PPOP-based RoA to rise by 60bps to 2.5% by Q4, supported by:
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37bps NIM expansion
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Recovery in fee income
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Operating expense moderation in 2H
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IIFL forecasts FY27–28 RoA/RoE of 1.2%/12.2%, driven by better margin management and lower credit costs.
CLSA – Hold | Target: ₹260 | No Upside
CLSA maintained a Hold rating with a target in line with CMP, citing operational challenges despite some balance sheet positives. Q1 PPOP was 16% below estimates, impacted by lower NII and higher opex, though treasury gains helped partially offset the shortfall.
Key concerns:
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Gross slippage ratio elevated at 4.6%, up 70bps QoQ
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NIM declined 40bps QoQ to 4.5%, although management believes it has bottomed
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Loan and deposit growth were steady at ~10% YoY
CLSA acknowledged cost of deposits should gradually ease, with RBL already cutting its weighted average savings rate by 100bps, which could support margin recovery ahead.
Brokerage Summary:
| Brokerage | Rating | Target Price (₹) | Upside from CMP (₹260.70) |
|---|---|---|---|
| CITI | Buy | 300 | +15% |
| IIFL | Buy | 300 | +15% |
| CLSA | Hold | 260 | 0% |
While CLSA prefers to wait for clearer signs of asset quality and operating leverage, CITI and IIFL believe RBL Bank is past its worst on NIM compression and credit stress, with valuation and cost control setting the stage for a potential turnaround in the coming quarters.
Disclaimer: The brokerage views expressed are based on publicly available research reports and do not constitute investment advice. Readers should consult a certified financial advisor before making any investment decisions.
