RBL Bank tanks 19% in two days on weak FY20 guidance

Topics RBL Bank | Buzzing stocks

Shares of RBL Bank continued to reel under pressure, down 5 per cent, to Rs 470 in intra-day trade on Monday. The stock has fallen 19 per cent in the past two trading days after the bank, on Friday, said it expects some challenges on some of their exposures in the near term.

The private sector bank's stock had recorded its sharpest single-day fall of 14 per cent on Friday since listing on the bourses on August 31, 2018. The stock was trading close to its 52-week low price of Rs 439 it achieved on October 23, 2018.

“Given the difficult environment, we do expect to face some challenges on some of our exposures in the near term,” Vishwavir Ahuja, MD & CEO, RBL Bank said while commenting on the performance of June quarter results.

At the same time, given the strong momentum in the bank businesses, the management expects to maintain a healthy profitable growth over the coming quarters.

RBL Bank reported 41 per cent year-on-year (YoY) jump in net profit at Rs 267 crore in the June quarter (Q1FY20). Net interest income during the quarter grew 48 per cent at Rs 817 crore on YoY basis.

Assets quality improved with the gross non-performing assets (NPAs) ratio - bad loans as a percentage of gross advances - declining to 1.38 per cent against 1.40 per cent in the year-ago quarter. Net NPA was down to 0.65 per cent during June quarter as compared to 0.75 per cent in the corresponding quarter last year.

“Given an unstable and fragile environment wherein corporate stress/defaults are increasing, the investors would want to take current stress disclosure by the bank with a pinch a salt. This will keep a tab on valuation thus creating a deterrent in equity raising plan of the bank (kind of a negative spiral),” analysts at YES Securities said.

RBL Bank intends to grow its loan book at 30 per cent in FY20, and thus would need capital by early FY21. FY20 RoA will be impacted by credit cost, but can recover smartly next year provided the disclosed stress does not increase (risk of BB+ & Below accounts migrating here), the brokerage firm said.

With the impact of additional credit costs in the near-term, RBL’s 1.5 per cent target ROA is likely to be pushed out by a couple of quarters, analysts at SBICAP Securities said in company update. The brokerage firm revised its FY20/FY21 earnings forecasts for the bank downward by 14 per cent/9 per cent to incorporate the additional credit cost impact.

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