RBL Bank Shares Crack 14% as Bank Signals at Spike in NPAs in Near Term

RBL Bank shares cracks nearly 14% on despite strong June quarter earnings as the bank management said that it expected some challenges on the bank’s asset quality front in the near term due to “some of its exposures”.

At 2.35 pm, RBL Bank shares were trading at Rs 503.40, down 13.2% on BSE after hitting an intra-day low of Rs 500.

RBL Bank’s profit grew 41% year-on-year to Rs 267 crore in the June quarter, driven by a near-35% loan growth. Net interest income also grew by a whopping 47.9% to Rs 817.32 crore during the quarter compared with a year ago. Net interest margins also hit an all-time high of 4.3%.

However, the management commentary pointed towards some weakness going ahead due to tight liquidity concerns, which dented investor sentiment and resulted in a sharp fall in stock price.

“The bank has had a good quarter of strong performance and has continued to maintain its growth momentum and improvement in operating metrics. However, given the difficult environment, we do expect to face some challenges on some of our exposures in the near term,” Vishwavir Ahuja, MD & CEO of RBL Bank, said in a BSE filing.

While addressing a post-earning press conference, he said RBL Bank sees a slight deterioration in corporate exposures in the next two-three quarters. “Tight liquidity and volatile equity market are impacting the liquidity of some of the clients,” said Ahuja.

“We could incur additional 35-40 bps credit cost owing to additional provisioning requirements. Gross NPAs (non-performing assets) could rise to 2.25-2.5% over the course of the year, but capital position continues to be comfortable,” added Ahuja.

Asset quality in the June quarter remained stable as gross NPAs stood unchanged at 1.38% of gross advances and net NPA ratio fell to 0.65% against 0.69% in the previous quarter.

But slippages remained high at Rs 225 crore at the end of June quarter against Rs 206 crore in the March quarter. Even write-offs were higher at Rs 147 crore in the quarter gone by against Rs 91 crore in the previous quarter.

Provisions for bad loans during the quarter increased 6.6% sequentially and 52% year-on-year to Rs 213.2 crore, but provision coverage ratio improved to 69.13% against 65.3% in the March quarter.