RBL Bank has been in the spotlight as various brokerages reassess their ratings amid rising concerns about the bank’s performance in its credit card and microfinance (MFI) portfolios. While the stock has shown resilience, recent developments have led to mixed views from major financial institutions. Here’s a summary of what key brokerages are saying:
Citi: Buy, target price cut to Rs 255
Citi has maintained a ‘Buy’ rating on RBL Bank, but slashed its target price to Rs 255 due to heightened stress in its co-branded credit cards with Bajaj Finance and its MFI book. The bank reported higher slippages at 4.7%, leading to a contraction in Net Interest Margins (NIM) by 40 basis points and a credit cost rise to 2.8%. Despite treasury gains of Rs 1.1 billion, the return on assets (RoA) and return on equity (RoE) came in below expectations, leading to an earnings miss. Citi also noted a cautious stance on unsecured lending, leading to a growth slowdown. The current market price (CMP) of RBL Bank is Rs 205.
JPMorgan: Neutral, target price cut to Rs 225
JPMorgan, on the other hand, has maintained a ‘Neutral’ stance and reduced its target price to Rs 225 from Rs 270. The brokerage pointed to RBL Bank’s disappointing Q2 FY25 results, with profit after tax (PAT) down 24% year-on-year to Rs 2.2 billion. The bank experienced a sharp rise in provisioning due to higher unsecured delinquencies, and gross and net slippages increased by 43% and 55% quarter-on-quarter, respectively. JPMorgan acknowledged the bank’s focus on wholesale and secured retail businesses but expects growth to remain below the bank’s guidance for FY25, citing a challenging credit environment.
Outlook
Both brokerages have highlighted RBL Bank’s challenges in its unsecured lending portfolios, particularly in credit cards and MFI. While Citi remains optimistic with a ‘Buy’ call, believing that the bank’s growth could rebound in the medium term, JPMorgan has adopted a more cautious view, seeing limited potential for a quick recovery due to ongoing credit stress.
Investors may want to watch how RBL Bank manages its asset quality and credit costs in the coming quarters before making a decision. The bank’s current price levels present a mix of risks and potential, with varying recommendations from brokerages.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Please consult a financial advisor before making any investment decisions.
