Q3 earnings effect: RBL Bank shares hit 52-week low, more pain ahead?

Shares of RBL Bank slipped to their 52-week low after the private sector lender reported its earnings for the December 2024 quarter. The banking stock fell 6% to a low of Rs 140 against the previous close of Rs 155.10 non BSE. Market cap of the bank stood at Rs 9192 crore. In terms of technicals, the relative strength index (RSI) of RBL Bank stands at 43.5, signaling it's neither trading in the overbought nor in the oversold territory. RBL Bank shares are trading lower than the 5 day, 10 day, 50 day, 100 day, 150 day and 200 day moving averages.  

Motilal Oswal has a Neutral stance with a price target of Rs 170. 

"We cut our EPS estimates by 8.6%/10.0% for FY26/FY27 as the asset quality will likely remain suppressed given the stress in the MFI sector. This will also keep margins and credit costs under pressure over the near term. We thus estimate FY26 RoA/RoE at 0.8%/7.9%. Reiterate Neutral with a target price of Rs 170 (premised on 0.6x Sep’26E ABV)," said Motilal Oswal. 

Nirmal Bang downgraded the stock to SELL from HOLD post Q3 earnings. It also cut its target price to Rs 144 from Rs 172 earlier. 

Nirmal Bang said the bank's higher provisioning led to a PBT loss, with gross slippages increasing QoQ. Loan CAGR is estimated at 11.8% over FY24-27E, and credit cost at 2.9%.

It cut PAT estimates by 39.6%, 20.4%, and 11.7% for FY25E, FY26E, and FY27E, respectively.

RBL Bank is now valued at 0.5x Dec'26E ABV, a 41.7% discount to its 5-year P/ABV mean, said Nirmal Bang adding that pressure on the setock is expected due to growth moderation and asset quality issues in microfinance and credit cards, despite increased provisioning coverage.

Emkay Global maintained a buy target of Rs 225 on the stock. "The clean up act in Q3 will continue In Q4, the  brokerage said while trimming FY25/26/27 earnings By 33%/12%/7%, building in slower growth. 

There is stress in the card portfolio due to breakup from Bajaj Finance with valuations remaining 
inexpensive at 0.5x Dec-26 adjusted book value. 

The brokerage also said it recommends the stock to investors ready to trade near-term pain for long- term gain. 

In the third quarter of this fiscal, the lender reported a 86% decline in net profit at Rs 33 crore against Rs 233 crore reported in the year ago period.

Gross non-performing asset (NPA) ratio rose to 2.92% as of December 31, 2024 against B2.88% in the previous quarter, but improved from 3.12% a year ago. Net NPA ratio fell to 0.53% from 0.79% in September 2024 and 0.80% in December 2023.

Provisions in Q3 rose nearly two-fold on year to Rs 1,189 crore in Q3 compared to Rs 458 crore in Q3 FY24. The bank made additional provisions of rS 414 crore for its Joint Liability Group (JLG) portfolio, raising NPA coverage for this segment to 85%.