Mr. Darpin Shah, Institutional Research Analyst, HDFC Securities.
RBL Bank (Annual Report Analysis): Risks more evident. Maintain REDUCE
(TP Rs 136, CMP Rs 180, MCap Rs 91bn)
Key takes from RBK's FY20 AR are as follows: (1) The share of top 20 depositors increased 40bps to 18.8% despite the ~1% (and ~8.1% QoQ in 4QFY20) fall in overall deposits. AR commentary indicates that the bank continues to focus on bulk deposits. (2) The bank appeared to have made some progress on asset-side granularity and this appears to be the focus, which is desirable in context of FY20 asset quality trends. (3) Borrowings from institutions and agencies and the RBI contributed to a majority of incremental borrowings, and overall borrowings grew at ~4x total assets. (4) Segment-wise asset quality data was in line with expectations. These disclosures concur with our stance on the bank. We maintain our REDUCE rating with a TP of Rs 136, as we believe that RBK faces challenges on both sides of the b/s- potential stress from high unsecured loan exposure and a weak deposit franchise.
Business granularity: Even as overall deposits dipped 1% in FY20, the share of the top 20 depositors increased 40bps to 18.8% indicating a slight increase in the reliance on wholesale deposits. RBK saw deposits dip by a sharp 8.1% QoQ in 4Q. This fall was exacerbated by its significant reliance on wholesale deposits. However, asset-side granularity improved as the share of the top 20 advances/ exposures came down ~160/100bps to 10.1/10.4%. This is a slight positive as large ticket loans and high group-level exposure resulted in a sharp increase in NPAs over FY20.
Borrowing profile: RBK's overall borrowings grew 43.7%, vs. 10.7% growth in overall assets to form 19% of total assets. 'Other inst. & agencies' which contribute 48.5% to overall borrowings, contributed 56.6% to incremental borrowings, having grown 55.1% YoY. Overseas borrowings, which form 34.2% of overall borrowings contributed to 29.2% of incremental borrowings. O/s borrowings from the RBI were Rs 8.9bn, vs. nil. YoY.
Wholesale banking: The AR indicates the following (1) the bank worked towards 'de-risking' and 'granularising' this portfolio. (2) The focus of this vertical has shifted towards flow led, transaction banking business. (3) RBK aims to become a primarily working capital bank for its clients, which is focused on transactional businesses and use term exposures wherever the overall relationship requires it. The bank appears to attribute a significant importance to wholesale funding, as it chose to highlight that (1) it wished to continue to focus on the bulk & government deposit businesses and (2) build a strong deposit franchise on the corporate side.
Shares of RBL Bank Ltd was last trading in BSE at Rs.173.8 as compared to the previous close of Rs. 173.4. The total number of shares traded during the day was 4426494 in over 64933 trades.
The stock hit an intraday high of Rs. 177.4 and intraday low of 171.1. The net turnover during the day was Rs. 772989377.