RBL Bank

RBL Bank reported robust advances growth of 19% year-on-year and 3% sequentially in Q1 FY25, driven significantly by retail advances which grew 31% Y-o-Y and 9% sequentially. Newer secured businesses like housing and rural vehicles showed impressive growth rates of 52% and 74% Y-o-Y respectively. On the deposit front, the bank's focus on granular deposits yielded strong results, with deposits less than INR3 crores growing 25% Y-o-Y and 5% sequentially, now constituting 49.3% of total deposits. Management aims to increase this share to over 50% in the coming quarters, supporting an overall deposit growth target of 18-20%.

The bank's Net Interest Income (NII) increased by 20% Y-o-Y and 6% sequentially to INR1,700 crores, contributing to a 19% Y-o-Y rise in total income to INR2,505 crores. Net Profit for the quarter grew 29% Y-o-Y and 5% sequentially, reaching INR372 crores, with ROAs at 1.14% and ROES at 9.88%. Operational efficiency also saw improvement, with the cost-to-income ratio decreasing to 65.7% from 69.3% in Q1 last year. Management expects cost growth to be lower than advances growth this year and aims for a 2-3% per annum reduction in the cost-to-income ratio.

Asset quality showed mixed trends. While GNPA improved to 2.69% from 3.22% a year ago, and NNPA remained stable at 0.74%, the bank experienced an increase in slippages in Q1. Credit card slippages were INR400 crores and microfinance slippages were INR136 crores, partly due to the transition of collections for co-branded cards and general Q1 weakness. Management anticipates some spillover impact in Q2 but expects stabilization and improvement in slippages from Q3 onwards. The bank maintains contingent provisions of INR283 crores (1% of book) for credit cards and microfinance as a cushion.

The bank's total capital stood at 15.56% and CET1 ratio at 13.85% as of June 2024. The CET1 ratio saw a one-time^📎 impact from an increase in operational risk RWA, which management expects to normalize. RBL Bank plans to raise Tier 2 capital this year and may raise equity capital before August of next year, though there are no immediate plans for an equity raise in the near term. Strategic initiatives include diversifying sourcing to achieve 50% non-DSA based origination and expanding the RBL Finserve subsidiary to around 200 branches to drive retail product sourcing.

The bank's margins were flattish sequentially in Q1, excluding a one-time^📎 tax interest refund of INR68-70 crores. Management expects margins to remain flattish in Q2, followed by a slight improvement in the second half of the year, driven by a focus on better risk-adjusted returns across portfolios. For credit costs, the guidance for FY25 is in the range of 2.1-2.2%, with the first half expected to be similar to Q1 and a pull-down anticipated in the second half, aiming for the higher end of the 1.75-2.25% range for the full year.