RBK's 4Q earnings were higher vs. estimates on a/c of sharper than expected margin expansion (not sustainable) and lower than expected LLPs (elevated nevertheless, to persist). B/s growth was constrained as deposits dipped 8% QoQ. RBK faces challenges on both sides of the b/s- potential stress from high unsecured loan exposure and a weak deposit franchise. Despite the sharp correction over a period, we maintain our REDUCE rating (TP of Rs 136, (0.6x Mar-22E ABV)), given elevated risks and sub-par expected return ratios.
Liabilities: Deposits fell, led by a 12% QoQ decline in TDs and a 7% fall in SA. CASA ratio rose (partly optically) 280bps to 29.6%, led by a 15% growth in CA. Interestingly, disclosures indicate that subsequent to the qtr, RBK's deposits grew ~4% in Apr-20 (+Rs 22bn). The absolute addition is significantly higher vs. previous yrs and this may not sustain. (1) High reliance on bulk deposits, and (2) increased deposit polarisation in the sector will limit deposit traction.
Asset quality: GNPLs increased ~6% QoQ to Rs 21.4bn (3.6%). Slippages were lower QoQ (-32.3%) but remained elevated at 4.8% and were impacted by the standstill classification of a/cs. Elevated C&IB stress (8.2% NPLs) persisted. Ex-wholesale, asset quality trends were remained benign. Slippages will remain elevated, stemming from RBK's (1) exposure risky segments- credit card debt and micro-credit (29.2% of loans), and (2) low rated pool of corp loans (20.7% of corp loans). We expect slippages of 3.6% over FY21-22E.
Loan growth: Overall loans dipped 2.7% QoQ (+6.8% YoY) because of sharp de-growth in wholesale loans (16/13%, 44% of loans). Retail loans grew 41/6% as credit card debt grew 98/12% while other retail sub-segments saw much softer growth. Within DB&FI, micro-credit grew 17/9% to form ~11% of loans. We expect RBK to see materially slower growth on a/c of (1) continued re-calibration of its corp book, (2) significantly slower growth in high-risk fast growing loans (credit cards and micro-credit). We model a loan growth of 9% over FY21-22E.
Management commentary on COVID-19: 35% of RBK's customers by value opted for the moratorium (all micro-credit customers, 13/24% by no/value of credit card customers and 22% of wholesale borrowers and 46% of retail customers by no). The mgt guided for the persistence of elevated credit costs in FY21E (similar to FY20 levels), with higher retail credit costs.
Shares of RBL Bank Ltd was last trading in BSE at Rs.117.05 as compared to the previous close of Rs. 119.35. The total number of shares traded during the day was 2417794 in over 19150 trades.
The stock hit an intraday high of Rs. 122.45 and intraday low of 114.1. The net turnover during the day was Rs. 282906898.