RBL Bank Q2 Net Profit Surges 45.9%, Asset Quality Stable Despite Higher Provisions
RBL Bank reported a 45.9 per cent year-on-year rise in its net profit to Rs 294.1 crore in the quarter ended 30 September, exceeding analyst estimates. Net interest income for the bank increased by 25.6 per cent to Rs 1,475 crore during the quarter. Asset quality for the lender remained stable, with gross non-performing asset ratio falling 10 basis points sequentially to 3.12 per cent as of September, and net NPA ratio fell by 22 bps quarter-on-quarter to 0.78 per cent.
However, provisions for the quarter rose 2.65 times from a year earlier to Rs 640.4 crore, largely due to contingent provisions created in the bank's microfinance and credit card segments. The bank also changed its credit card provisioning policy, resulting in additional provisions.
RBL Bank reclassified charges paid to Business Correspondents (BC) from interest income to the expense line, affecting net interest income and expenses by the same amount. After reclassification, the net interest margin for the bank increased by 1 basis point to 5.54 per cent on a sequential basis.
Despite the additional provisions, R Subramaniakumar, the CEO of RBL Bank, stated that the underlying asset quality remains robust and the bank does not anticipate any stress, given the increase in risk underwriting capabilities.
The provision coverage ratio, including technical write-offs, stood at 88.4 per cent. Subramaniakumar indicated an increase in the cost of deposits by approximately 20 basis points but expressed confidence in improving net interest margins.
Regarding stress in unsecured retail loan segments, Subramaniakumar mentioned that personal loans are primarily a product for customer retention and not for balance sheet expansion. He expects no stress in the personal loans segment.
RBL Bank reported fresh slippages of Rs 541 crore in the quarter, down 33.4 per cent compared to the previous year.
The bank is well-capitalised with a capital adequacy ratio of 17.07 per cent, and the CEO indicated that they have no immediate requirement for additional capital to support their growth plans. If needed, they would consider tier-2 capital.
The bank aims to achieve 18 per cent growth in deposits by the end of the year. It added 67 lakh customers in the quarter and recorded a CASA ratio of 35.7 per cent, a slight decrease from the previous year.
The bank's growth outlook remains positive, with a 20 lakh increase in customers compared to the same quarter the previous year.
