Analysts at HDFC Securities say slippages (loans turning bad) will remain elevated, given the exposure to unsecured loans such as credit cards and micro loans (29.2 per cent of RBL’s book).
What could also be a pain point is the share of low-rated corporate accounts (20.7 per cent of corporate book).
Therefore, while the slippage ratio moderated by 60 basis points (bps) sequentially to 1.19 per cent, how far this trend sustains needs to be seen in the context of likely pressure from new pockets, such as retail unsecured loans.
One also needs to keep an eye out for loans under the moratorium. At an overall level, RBL has offered the moratorium to 30 per cent of its customers in value, which includes 24 per cent of credit cards outstanding.
It has also made additional provisioning of Rs 110 crore for special mention accounts, as mandated by the regulator.
Therefore, the gross non-performing asset ratio, which peaked to 3.62 per cent in Q4, may not ease anytime soon.
Therefore, not much could be attributed to the bad loan provisions falling to Rs 614 crore, from Rs 638 crore in Q3.
Among a few positives is that capital adequacy stands at 16.45 per cent. The management also highlighted that it had gained the lost business from government deposits. However, with the management guiding for lower growth, faster accretion in deposits might eat into profitability.
Consequently, RBL may be in for a litmus test in FY21. Investors
may be better off waiting and not be lured by valuations of 0.7x its FY21 estimated book.