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Informist, Wednesday, Aug 21, 2024

MUMBAI – ICRA reaffirmed its 'AA-' rating and 'stable' outlook to RBL Bank's 700-mln-rupee Basel-III-compliant tier-II bonds, the bank notified exchanges today. The rating agency also reaffirmed the A1+ rating for the bank's 60-bln-rupee certificate of deposit.

The rating agency cited improvement in the bank's earnings due to healthy growth in advances and overall deposit base as the reason for reaffirming the ratings, the release said.

For the quarter ended June, RBL Bank's net profit rose 29.0% on year to 3.72 bln rupees, mainly due to a rise in interest income. Net advances grew 19% on year to 867.04 bln rupees as on Jun 30. For the same quarter, the bank's deposits rose 18% on year to 1.01 trln rupees.

"The ratings also consider RBL's comfortable capital position and adequate liquidity, though it may need to raise equity capital in the next couple of quarters to support growth," the filing said. The Basel III capital adequacy ratio was 15.23% as on Jun 30, compared to 16.18% a quarter ago and 16.39% a year ago.

ICRA said it expected the bank to raise capital over the next few quarters, keeping the overall capital cushion as well as the solvency levels better than the negative rating triggers.

With the rising asset quality pressure in the credit card and microfinance segments, the bank’s ability to control credit costs in the backdrop of sub-optimal operating profitability remains a challenge, the exchange filing said. The gross non-performing asset ratio of the bank was 2.69% as on Jun 30 compared with 2.65% a quarter ago.

"The ratings also take note of the vulnerable book (SMA1 -1, SMA-2 and standard restructured book), which has moderated meaningfully from the much higher level a year ago," the exchange filing said.

Other factors for reaffirming the ratings were the ability of the bank to maintain comfortable capitalisation and solvency, the rating agency said.

ICRA said the bank's ability to maintain the capital cushions above 3% of the Tier I regulatory levels and 9.5%, including capital conservation buffers will be a key positive factor. The return on assets at more than 1.3% on a sustained basis would also be a positive factor for the rating, it said.

Noting risks to ratings, ICRA said a deterioration in the asset quality or capital position could lead to the weakening of the solvency profile with net NPA or core equity of more than 25% on a sustained basis. This has the potential to incur a downgrade in the rating, it said.

Moreover, a sustained return on assets of less than 0.8%, or a decline in the capital cushions to less than 2% of tier I regulatory levels on a sustained basis, will remain negative triggers, the rating agency said.

Today, shares of RBL Bank closed 4.3% higher at 228.10 rupees on the National Stock Exchange.  End

Reported by Sourabh Kumar

Edited by Deepshikha Bhardwaj

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