RBL Bank Q1 FY26 earnings call

RBL Bank reported net advances of INR94,431 crores, growing 9% year-on-year and 2% sequentially. Total deposits also saw healthy growth, up 11% year-on-year and 2% sequentially to INR1,12,734 crores. However, Net Interest Income (NII) was down 13% year-on-year and 5% sequentially to INR1,481 crores, leading to a Net Interest Margin (NIM) of 4.5%, a decline from 4.89% in the previous quarter. Profit After Tax (PAT) for the quarter stood at INR200 crores, with operating expenses rising 12% YoY to INR1,847 crores.

The bank's advances growth was driven by secured retail, which rose 23% year-on-year, and commercial banking, which grew 32% year-on-year. Unsecured retail segments, including credit cards and JLG, saw deliberate moderation, remaining flat or lower, improving the overall risk profile. On the liabilities side, granular retail deposits grew 16% year-on-year and 5% sequentially, now constituting 51.4% of total deposits, up from 49.3% last year. CASA deposits also increased 11% year-on-year, contributing to a CASA ratio of 32.5%.

The decline in NIM to 4.5% was primarily attributed to the repricing of advances, resulting in a 50 basis point sequential reduction in yield on advances, and a change in the portfolio mix. Management indicated that Q1 FY26 marked the low point for margins, with bulk of the advances repricing now behind them. They expect deposit costs to fall by 20-25 basis points in Q2 and anticipate an improvement in margins to become visible from Q3 onwards, targeting a 4.8% NIM range by Q4 exit.

Operating costs increased by 12% year-on-year and 9% sequentially to INR1,847 crores, pushing the cost-to-income ratio to 72.4%. This rise was mainly due to higher collection costs in cards as the bank fast-tracked the in-house migration of collection services. Management expects these costs to moderate and rationalize from Q3 onwards through various efficiency initiatives, aiming for overall opex growth to be in the 9-12% range, not exceeding advances growth, with a downward bias.

Slippages in the JLG book were approximately INR318 crores, and in cards, around INR520 crores, contributing to credit costs of approximately INR441 crores for the quarter. The bank reinstated a 1% contingent provisioning on its JLG book, amounting to INR54 crores for the quarter, with roughly 50% of the MFI portfolio now covered by CGFMU. Management guided for a sub 2% credit cost and expects credit card delinquency improvement to be more material in H2.

RBL Bank is targeting a mid-teens (14-15%) overall advances growth for FY26, with wholesale advances expected to grow in mid-teens, unsecured retail in high single digits to low-teens, and secured retail in the early to mid-20s. The bank emphasized a disciplined approach focusing on risk-rewards and quality of growth, leveraging its branch network, especially in Tier 2 and 3 locations, for better yields and cross-selling secured loans. They also reiterated their commitment to achieving a 1% ROA exit annualized in Q4 FY26.

The bank's capital position remains robust, with a Total Capital Ratio (including profits) of 15.59% and a CET1 ratio of 14.05%. This was supported by lower risk-weighted assets. The Liquidity Coverage Ratio (LCR) for Q1 stood at 152%, which is higher than normal, and management expects it to moderate down to 130-135 levels going forward^⏳. The Credit Deposit Ratio was reported at 83.8%.