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Informist, Wednesday, Apr. 23, 2025

NEW DELHI - RBL Bank is seen posting a sharp sequential increase in its net profit for the quarter ended March on the back of lower provisions, with the private sector lender having set aside more money than was required in Oct-Dec for its microfinance portfolio.

According to the average of estimates by seven brokerages, RBL Bank's net profit is seen 51% higher in Jan-Mar compared to Oct-Dec, at INR 494.29 million, with estimates in the range of INR 188 million and INR 857 million. However, on a year-on-year basis, the bottomline is expected to be sharply lower by 86%.

"PPoP (pre-provision operating profit) is projected to decrease by 6.6% quarter-on-quarter, driven by a 220 basis points rise in CTI (cost to income) and NIM compression. However, earnings are expected to jump by 60% quarter-on-quarter (79% year-on-year decline) due to lower provisions sequentially," Centrum Broking said in a pre-earnings report. The brokerage has a 'buy' rating on RBL Bank with a target price of INR 231.

On Wednesday, the lender's shares ended 1.1% higher at INR 191.67. The bank will announce its quarterly result on Friday.

In Oct-Dec, RBL Bank's profit after tax slumped 86% on year to INR 326.3 million after it made an additional provision of INR 4.14 billion on "prudent basis" on its Joint Liability Group loans--or JLG loans--which are micro loans made to a small group of borrowers.

"This provisioning on the entire GNPA (gross non-performing assets) of JLG takes us to 85% coverage in the JLG book. And in addition, we continue to carry the full contingent provisioning of INR 2.73 billion, which should help us in dealing with what we expect to be still above trend slippage in Q4 (Jan-Mar) and the idea would be to carry as little baggage as possible into the next financial year on this book," Jaideep Iyer, RBL Bank's head of strategy, had said in January in an analyst call following the release of the Oct-Dec numbers.

Earlier this month, RBL Bank told the exchanges that the collection efficiency for the JLG segment had risen to 99.0% in March. The number stood at 97.5% in October, 97.6% in November, and 98.4% in December.

As at the end of March, the private bank's gross advances were up 11% year-on-year, led by a 41% increase in secured retail loans, while deposits grew at a slower clip of 7%.

Analysts see RBL Bank's net interest income in Jan-Mar at INR 15.87 billion, little changed both sequentially and on a year-on-year basis. With lower loan disbursals in the microfinance and credit card segments--the two were down 6% and 1% quarter-on-quarter, respectively, as at the end of

December--margins are likely to be under pressure and reduce further from Oct-Dec's 4.90%. The bank's management had guided for the same in January, with the net interest margin having continuously fallen from 5.67% in the first quarter of 2024-25 (Apr-Mar).

"NIM (-10 bps quarter-on-quarter) will be impacted by high interest reversals and slower disbursements in MFI/CC (microfinance/credit card)," Dolat Capital said. The brokerage has an 'accumulate' rating on RBL Bank with a target price of INR 180.

Following are the Jan-Mar earnings estimates for RBL Bank based on reports from seven brokerage firms in descending order of the estimate of net profit:

End

Reported by Siddharth Upasani

Edited by Vandana Hingorani

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