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Informist, Friday, Jul. 18, 2025

By Kabir Sharma

MUMBAI – The grey clouds of microfinance stress are still hovering over RBL Bank as the lender is expected to report a 54.3% on year fall in its net profit for the quarter ended June, according to brokerages tracking the lender. However, sequentially the private bank is seen reporting a sharp jump in bottom line as the peak of bad asset quality is behind the lender, brokerages said.   

According to the average of estimates by 10 brokerages, RBL Bank is expected to report a net profit of INR 1.70 billion for the quarter ended June, less than half the INR 3.72 billion reported in the year-ago period. Sequentially, however, the bank is seen more than doubling its net profit from INR 687 million reported in Jan-Mar. 

Despite the dismal performance and the overhang in the microfinance portfolio, shares of the bank have risen over 40% since it declared its earning for the Jan-Mar quarter on Apr. 25. At 1416 IST, shares of the bank traded at INR 263.75 on the National Stock Exchange, down 1.8% over Thursday. The bank is scheduled to declare its earnings on Saturday. Seven brokerages have a Buy rating on the stock while three have a sell rating. One brokerage has recommended to hold the shares.  

"RBL could see a sharp improvement on quarter. While gross slippages in microfinance have peaked, the stress resolution (rollback from SMA) rate is still sub-par; thus, full normalisation in slippages could be two quarters away," ICICI Securities Ltd. said in a note. Slippages in the bank, especially those arising out of the microfinance portfolio, are expected to normalise going forward as the bank has provided 100% provision coverage for the same, the management of the bank had said after the Jan-Mar earnings.

The bank has been struggling with slippages in its microfinance portfolio for at least last three quarters. In the March quarter, net profit of the bank fell 81% on year to INR 687 million as provisions rose 90% on year to INR 7.85 billion. "In a nutshell, we don't expect to take extraordinary decisions on MFI going forward, as we see the industry right now," the management had said.

During the quarter ended Mar. 31, the bank, on prudent basis, made additional provision on gross non-performing assets of Joint Liability Group portfolio, taking total NPA provision on this portfolio to 100%, according to the notes to accounts of the bank. In March, the gross non-performing asset ratio was down 32 bps on quarter at 2.60% and the net non-performing asset ratio was down 24 bps on quarter at 0.29%.

"Peak MFI (microfinance) slippages are behind us with improving X-bucket collection efficiency and net forward flow rates, but they have not completely normalised yet," IIFL Capital Services Ltd. said. The bank reported fresh slippages of INR 10.58 billion in the March quarter, lower than INR 13.09 billion reported a quarter ago.

Brokerages see the net interest income of the bank falling 9.3% on year to INR 15.42 billion in the June quarter, according to the average of their estimates. The net interest income de-grew 2% on year to INR 15.63 billion in the previous quarter.

Brokerages also expect a major compression in the margins of the bank. "NII (net interest income) growth will be slower than average loan growth due to fall in yield on advances outpacing cost of deposits. Consequently, NIM (net interest margin) will be lower sequentially," YES Securities (India) Ltd. said. The net interest margin moderated to 4.89% in the Jan-Mar quarter from 4.90% a quarter ago and 5.45% a year ago. 

The bank had reported its growth numbers earlier this month, with the numbers showing a muted loan growth, according to the brokerages. RBL Bank's gross advances were up 9% on year and 2% sequentially to INR 967.04 billion as of Jun. 30, according to an exchange filing by the lender. The bank's total deposits as of Jun. 30 grew 11% on year to INR 1.127 trillion. The ratio of low-cost current account, savings account deposits to the overall deposits fell to 32.5% as on Jun. 30 against the 34.1% as on Mar. 31.

Ananlysts are monitoring the loan portfolio health in Bihar, Karnataka and Tamil Nadu, they said. The bank's outlook on its microfinance portfolio and loan growth will remain in discussion, they said. Following are the Apr-Jun earnings estimates for RBL Bank based on reports from 10 brokerage firms in descending order of the estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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