RBL Bk says slippages to fall by Mar 31 as stressed assets down from qtr ago
This story was originally published at 18:59 IST on 18 January 2025
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--RBL Bank: Seeing reduced slippages in cards business
--RBL Bank: Trends show bank's slippages to be lower as of Mar 31 vs Dec 31
--RBL Bank: Slippage in microfinance segment weighed on NII, NIM Oct-Dec
--RBL Bank: Expect NIM to inch up Jan-Mar as microfinance book normalises
--RBL Bank: Expect 99% collection efficiency by Mar vs 98.5% Dec
--RBL Bank: Govt's loan waiver scheme reduced collection efficiency Oct-Dec
--RBL Bank: Macro factors, not micro, led to poor performance Oct-Dec
--RBL Bank: Slippages in cards to normalise in 2 qtrs, microfinance in 1 qtr
--RBL Bank: High provisions Oct-Dec to prevent carry-over baggage into FY26
--RBL Bank: See unsecured loan growth to slow to 28-29% on year over 2 qtrs
--RBL Bank: Focus is on secured portfolio growth
--RBL Bank: Got INR 1.44 bln from stake sale in Oct-Dec
--RBL Bank: FX retail, wholesale business aided jump in other income Oct-Dec
--RBL Bank: No plans to raise funds right now
MUMBAI – The trends in bad loans at the end of December suggest that RBL Bank's slippages will fall by Mar. 31, after shooting up in Oct-Dec, the bank's management said in a post-earnings media call. Stressed loans in special mention accounts 1 and 2 had fallen from the previous quarter, which is likely to lead to lower slippages in the March quarter, they said.
During the December quarter, the bank saw fresh slippages of INR 13.09 billion, nearly doubling from INR 6.66 billion a year ago. This led to provisions nearly tripling on year to INR 11.89 billion. This dragged the bottom line 86.0% down on year to INR 326.3 million in Oct-Dec, the bank declared earlier on Saturday. Balances in the special mention accounts fell to INR 5.45 billion in Oct-Dec against 6.16 billion the previous quarter, according to the company's investor presentation.
Slippages in the microfinance segment weighed on the bank's net interest income and margins during the reported quarter, officials including Managing Director and Chief Executive Officer R. Subramaniakumar said. The bank's management said that slippages in the credit card segment would normalise in the next two quarters, with a reduction already seen, and that in the microfinance segment is expected to fall within a quarter.
"The theme which has kept all of us concerned is some challenges on asset quality, though largely restricted to the unsecured segments, and it is majorly due to the current macroeconomic environment. We believe that this may be a short-term challenge, and collectively, we will overcome the challenge," Subramaniakumar said on the call.
The bank's management said that asset quality in the unsecured segment was poor due to regional issues in Karnataka, the government's loan waiver scheme, and after the end of its partnership with long-time partner Bajaj Finance in the credit card segment in November. The bank's collection efficiency is expected to improve to 99% by Mar. 31 from 98.5% as of Dec. 31, the management said.
With this, the bank also expects its margins to inch up, starting in Jan-Mar. Its net interest margin was 4.90% in Oct-Dec, against 5.04% the previous quarter, and 5.52% a year ago.
The bank aims to focus on their secured business portfolio rather than the unsecured segment in the current regulatory environment, the management said. The unsecured loans portfolio growth of RBL Bank is expected to slow down to 28-29% over the upcoming two quarters from 30% for the quarter ended December. "We expect unsecured businesses to grow slower than secured at least for the next six to nine months," they said.
RBl Bank's management also said that the bank had set aside INR 4.14 billion for its non-performing assets in the joint liability group segment as well as carrying a contingent provisioning of INR 2.73 billion during the reported quarter. The high provisioning is expected to prevent any carry-over of slippages into the upcoming financial year beginning April, the CEO said.
During the quarter, the bank's other income surged to INR 10.73 billion, up 38.0% on year. The management said it received INR 1.44 bln from selling its entire stake in DAM Capital Advisors Ltd. during the company's initial public offering in Oct-Dec. Proceeds from the bank's foreign exchange retail and wholesale businesses also aided the other income, the management said.
In addition to the other income boost, a tax writeback also added INR 2.25 billion to the bottom line. The bank attributed its tax writeback to favourable orders pertaining to taxes paid in 2019-20 (Apr-Mar) and FY21, the management said.
RBL Bank does not plan to raise capital right now, the management said during the call. Its shares closed 2.1% lower at INR 155.12 on the National Stock Exchange on Friday. End
Reported by Srijita Bose and Aaryan Khanna
Edited by Tanima Banerjee
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