RBL Bank shares in focus as Q1FY26 net profit declines 46% YoY. Should you buy?

Time of India

17 hours ago

Shares of
RBL Bank
are expected to be in focus on Monday after the private sector lender reported a 46% year-on-year (YoY) decline in its standalone net profit for the first quarter ended June 2025.
The bank posted a net profit of Rs 200.33 crore in Q1FY26, down from Rs 371.52 crore in the same quarter last year. The drop was attributed to weaker interest income and rising operating expenses.
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The bank's Net Interest Income (NII) for the quarter fell 13% YoY to Rs 1,481 crore from Rs 1,700 crore a year earlier. On a sequential basis, NII declined 5% compared to Rs 1,563 crore reported in the March 2025 quarter.
RBL Bank's Net Interest Margin (NIM) for Q1FY26 stood at 4.50%.
Operating profit declined 18% YoY to Rs 703 crore in Q1FY26, with the bank citing reductions in unsecured lending and the recent repo rate cut as key factors. Meanwhile, operating expenses rose 12% YoY to Rs 1,847 crore, compared to Rs 1,646 crore in Q1FY25.
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Despite these pressures, RBL Bank's net total income recorded a marginal increase of 2% YoY to Rs 2,550 crore.
On the asset quality front, the bank's gross non-performing assets (GNPA) rose slightly to 2.78% as of June 30, 2025, compared to 2.69% a year earlier. However, net non-performing assets (NNPA) improved significantly to 0.45%, down from 0.74% reported in the same period last year.
The bank reported a provision coverage ratio (PCR), including technical write-offs, of 94.2%. Total provisions, including specific, general, and contingent buffers, stood at 105% of gross NPAs, reflecting a conservative risk management approach.
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Post the Q1 results, domestic brokerage firm HDFC Securities maintained a 'reduce' rating on the stock with a target price of Rs 200.
'RBL Bank (RBK) reported muted earnings on the back of higher opex intensity, driven by elevated collection costs on the credit card portfolio, partly offset by moderation of slippages in the JLG portfolio. Loan growth was muted (+9% YoY) on the back of continued de-growth in unsecured segments,' said the brokerage firm.
Deposit growth came in at 11% YoY, with CASA ratio at 32.5% (-167bps QoQ) on account of lower traction in savings balances. While credit costs are likely to normalize in H2 FY26, we argue that stability in earnings could take longer, given the elevated unsecured mix (27% of loans), as RBK continues to build out its secured retail business. RBK is transitioning its credit cards business to in-house collections, which is likely to keep opex intensity elevated.
Given margin pressure from the shift in loan mix and higher collection costs, 1% exit RoA for FY26 is likely to be a challenge.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)