Higher Credit Costs
The most important factor is the sharp rise in credit costs, which increased by 40 basis points during the December quarter on a sequential basis to nearly 2.5%.
The rise in credit costs was due to the higher write-offs in the lender’s credit card portfolio.
Provisions Rise
RBL Bank’s net profit missed expectations during the quarter. The figure of ₹214 crore was lower than the consensus expectations, which were in excess of ₹260 crore.
The impact on the lender’s profitability was due to elevated provisions, which increased by 28% from the previous quarter to ₹639 crore from ₹500 crore.There was also a one-off expense of ₹32 crore due to the new labour laws.
Management’s Warning
The management of RBL Bank spoke on the earnings call, stating that the credit card portfolio is seeing some challenges due to the macro portfolio and a similar trend is likely to play out in terms of slippages over the next two quarters.
The cards in force have also grown sequentially after 6-7 quarters of decline.
Analysts’ Take
CLSA maintained its “hold” rating on the lender with a price target of ₹310 calling it an “average quarter” on the balance sheet front.
13 out of the 22 analysts covering the stock have a “buy” rating on the stock, six say “hold”, while three have a “sell” rating on the lender.
Shares of RBL Bank are trading 7% lower on Monday at ₹301.95. The stock is still up 91% over the last 12 months.
