Earnings Review
RBL Bank's Oct-Dec net profit weaker than expected on high provisions
This story was originally published at 15:32 IST on 18 January 2025
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By Christina Titus
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--RBL Bank Oct-Dec net profit INR 326.3 mln
--Analysts saw RBL Bank Oct-Dec net profit INR 1.82 bln
--RBL Bank Oct-Dec net profit INR 326.3 mln vs INR 2.33 bln year ago
--RBL Bank Oct-Dec total income INR 46.10 bln vs INR 39.69 bln year ago
--RBL Bank Oct-Dec provisions INR 11.89 bln vs INR 4.58 bln year ago
--RBL Bank gross NPA ratio 2.92% as on Dec 31 vs 2.88% quarter ago
--RBL Bank net NPA ratio 0.53% as on Dec 31 vs 0.79% quarter ago
--RBL Bank Basel III capital adequacy ratio 14.86% as on Dec 31
--RBL Bank Apr-Dec net profit INR 6.27 bln vs INR 8.15 bln year ago
--RBL Bank Apr-Dec total income INR 133.70 bln vs INR 112.23 bln year ago
--RBL Bank: Made additional provision of INR 4.14 bln on NPA as on Dec 31
--RBL Bank: Made additional provision on NPA of joint liability group book
--RBL Bank: Securitised personal loan book of INR 1.84 bln in Oct-Dec
--RBL Bank Oct-Dec net interest income INR 15.85 bln, up 3% on year
--RBL Bank Oct-Dec NIM 4.90% vs 5.04% in Jul-Sept, 5.52% year ago
--RBL Bank provision coverage ratio at 82.17% as on Dec 31
--RBL Bank net advances INR 904.12 bln as on Dec 31, up 13% on year
--RBL Bank deposits INR 1.07 tln as on Dec 31, up 15% on year
--RBL Bank: CASA ratio at 32.8% as on Dec 31 vs 33.6% as on Sept 30
--RBL Bank Oct-Dec average liquidity coverage ratio at 143%
--RBL Bank retail advances INR 551.99 bln as on Dec 31, up 19% on year
--RBL Bank: Oct-Dec cost of deposit 6.6% vs 6.5% in Jul-Sept, 6.3% year ago
MUMBAI – RBL Bank's net profit for the Oct-Dec quarter missed analysts' expectations and fell sharply on account of high provisions. The bank reported an 86% on-year slump in net profit to INR 326.3 million. Sequentially it fell 85.3%. Analysts had expected the net profit at INR 1.82 billion for the quarter ended December.
The provisions for the bank surged 159.5% on year to INR 11.89 billion for Oct-Dec and 92.3% on a quarterly basis. During the quarter, the bank made an additional provision of INR 4.14 billion on its non-performing loans of the joint liability group portfolio, which added further to the total provisions, the bank said in its notes. As of Dec. 31, the bank's provision coverage ratio was at 82.17%.
In terms of asset quality, the gross non-performing asset ratio of the bank was slightly up at 2.92% as of Dec. 31, compared to 2.88% a quarter ago. The net non-performing asset ratio as of Dec.31 was 0.53% compared to 0.79% a quarter ago. During the quarter, the bank saw fresh slippages of INR 13.09 billion, higher than INR 10.26 billion reported a quarter ago.
Total expenditure excluding provisions and contingencies rose 12.8% on year to INR 36.13 billion during the quarter. Operating expenses grew 6.7% on year to INR 16.62 billion. The total income of the bank was INR 46.10 billion for the quarter, up 16.1% on year, of which interest income rose 10.8% on year to INR 35.36 billion in the reporting quarter.
For the nine months ended December, the net profit of the bank was INR 6.27 billion compared to INR 8.15 billion a year ago. Total income for the same period was INR 133.70 billion compared to INR 112.23 billion a year ago.
The bank's net profit was also adversely affected by the contraction in net interest margin on a quarterly basis. The net interest margin declined to 4.90% in Oct-Dec from 5.04% in Jul-Sept. The bank's net interest income grew 3% on year to INR 15.85 billion for the quarter ended December. Other income was INR 10.73 billion, up 38% on year.
On the asset side, the net advances of the bank were up 13% on year at INR 904.12 billion as of Dec. 31. Of this, retail advances rose 19% on year to INR 551.99 billion, while wholesale advances increased just 5% to INR 352.13 billion during Oct-Dec. The bank said that commercial banking would remain their focus area in the wholesale segment, which has shown on-year growth of 21%. The retail-wholesale mix within advances stood at 61:39.
Within the overall loan book, the share of personal loans and credit cards dropped 5% and 1%, respectively, on a sequential basis. The personal loan book stood at INR 37.22 billion and the credit card book at INR 172.88 billion as of Dec. 31. The bank has securitised the personal loan book of INR 1.84 billion in Oct-Dec, which might have helped the lender to reduce the portion of this segment.
"We remain cautious about the short-term challenges emanating from macro-economic environment affecting certain unsecured lending segments," R. Subramaniakumar, managing director and chief executive officer, said in a press release.
On the other hand, deposit growth outpaced the credit growth, rising 15% on year to INR 1.07 trillion as of Dec. 31, led by granular deposits. The share of granular deposits in overall deposits grew 20% to INR 537.19 billion. This accounts for 50.3% of total deposits. Granular deposits are deposits less than INR 30 million. The current account savings account ratio was 32.8% as of Dec. 31, compared to 33.6% a quarter ago. For the December quarter, the bank incurred a cost of deposit of 6.6%, compared to 6.5% a quarter ago and 6.3% a year ago.
The capital adequacy ratio-Basel III of the bank declined to 14.86% from 15.39% a quarter ago. The bank said it is well capitalised for medium term growth with stable liquidity. The average liquidity coverage ratio for the December quarter was 143%.
On Friday, shares of the bank closed 2.1% lower at INR 155.12 on the National Stock Exchange. End
Edited by Tanima Banerjee
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