RBL Bank shares climbed 5% today; target prices suggest upside potential

Shares of RBL Bank Ltd climbed over 4 per cent in Monday's trade, even as the bank's September quarter estimates came in lesser than analyst projections, as the bank utilised tax write-backs of prior years for building contingency and accelerated provision buffers. Brokerages said the one-off gains were utilised prudentially, business growth was healthy and that asset quality improved sharply.

The stock gained as the management sounded confident of achieving 5 per cent net interest income (NIM) in FY24, on account of increased share of retail advances.

Nirmal Bang Institutional Equities said the bank is on an improving earnings growth trajectory, driven by healthy growth, margin expansion and stable asset quality. It expects the bank to achieve a return on asset (RoA) of 1.2 per cent and return of equity (RoE) of 11.2 per cent by FY25. Nirmal Bang maintained its 'BUY' call on the stock with a target price of Rs 303.

RBL Bank, said Motilal Oswal Securities, reported a strong performance as it leveraged one-off gains to to strengthen the balance sheet by making contingent provision on MFI and Cards book and tighten the provisioning policy.

The business experienced robust growth, marked by healthy trends, and the management anticipates a consistent momentum, driven by retail loans, the domestic brokerage said.

"Deposit growth was healthy though CASA ratio witnessed slight moderation. The bank reported a steady improvement in asset quality along with a decline in restructured book, which bodes well for incremental outlook on asset quality. We raise our FY24/25E earnings by 4 per cent/1 per cent and estimate RBL Bank to deliver FY25 RoA/RoE of 1.2 per cent/11.2 per cent. We reiterate our Neutral rating on the stock with a revised trget of Rs 265," it said.

Arihant Capital Markets said the bank has displayed a healthy performance for the quarter, driven by improved asset quality and credit growth. Growth in retail advances continued to be robust, it said while maintaining a positive outlook on the stock.

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