RBL Bank shares hit 10% lower circuit as Q2 PAT declines 24% YoY. Should you invest?

Shares of RBL Bank dipped 10% to hit its lower circuit at Rs 184.95 on the BSE after the bank reported its second quarter results for FY25 on Saturday wherein it reported a 24% fall in its profit after tax (PAT) on a year-on-year basis (YoY) at Rs 223 crore.

The company’s net interest income (NII) grew 9% YoY at Rs 1,615 crore for the quarter and the net interest margins (NIMs) stood at 5.04%.

Meanwhile, the bank also reported a 24% YoY growth in its operating profit to Rs 910 crore for the reporting period. On a half-yearly basis, RBL Bank’s net profit also witnessed an increase of 2% YoY to Rs 594 crore and the NIMs were reported at 5.35%.

Post the Q2 results, here is what the brokerages said:

IIFL: Add | Target price: Rs 195

IIFL has maintained an Add rating on RBL Bank while cutting the target price to Rs 195The bank’s loan growth decelerates and non-II drives PPoP beat. There was a sharp asset quality deterioration. Bihar floods (highest exposure for RBL) has further accentuated the stress for RBL. IIFL expects credit cost to remain elevated in 2HFY25 and the valuations are likely to remain depressed.Investec: Hold | Target price: Rs 230

Investec has downgraded the stock to hold from an earlier buy and cutting the target price to Rs 230 from Rs 300.

The NII/RoAs missed the estimates on the back of interest reversals/spike in provisioning. Growth remained muted as the bank dials down disbursals in core verticals while the MFI stress rose on the back of over-leveraging/attrition in collection staff. Credit card delinquencies increase was seen on account of changes in collection

Processes.

Also read: Q2 results today: Bajaj Housing, 360 One Wam among 45 companies to announce earnings on Monday

Motilal Oswal: Neutral | Target price: Rs 220

The bank reported a miss in 2Q earnings due to higher provisions and a 32bp QoQ moderation in margins. Asset quality ratios deteriorated during the quarter as slippages were high in the CC and microfinance segments. However, deposits saw a robust growth, with the CASA ratio improving sequentially and leading to a C/D ratio of 86.6%. Loan growth remains modest, but the management anticipates the momentum to gain traction and deposits growth to sustain at the current level.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)