RBL Shares Rally 10% Despite 81% Profit Drop in Q4: Here's Why

RBL Shares rallied over 10% on Monday despite recording a whopping double-digit decline of 81% in profit levels in the quarter ending March. The banking firm's profit after tax (PAT) stood at Rs 68.7 crore, a significant decline from Rs 352.6 crore recorded in the corresponding quarter of the previous year.

At 12:25 pm, the RBL shares were trading at Rs 207.16 price level, up by more than 10.14% on the National Stock Exchange. Despite a sharp decline in profit levels, the overall quarterly results were largely in line with D-street expectations.

For instance, the net interest income (NII) declined by 2.3% year-on-year (YoY) to Rs 15.6 billion and was largely in line with Street expectations. Net interest margins (NIMs) remained broadly stable at 4.89% during the quarter.

Meanwhile, advances recorded a growth of 10.3% YoY and 2.4% QoQ, while deposits increased by 7.2% YoY and 3.9% QoQ. The CASA ratio improved by 130 basis points, reaching 34.1%. On top of this, RBL Bank witnessed an improvement in asset quality, with the net NPA improving by 24 bps to 0.29% as compared to the previous quarter.

Most brokerages, including Yes Securities and Motilal Oswal, have given a 'Buy' call on the banking stock.

What do analysts say?

Analysts are expecting the overall growth to gain traction in the upcoming quarters. Even slippages might normalise by the second quarter of FY26. "We estimate the cost-to-income ratio to improve to 61% by FY27. We estimate FY26E RoA/RoE at 1.2%/12.8% and upgrade RBL from Neutral to Buy with a target price of Rs 220," Motilal Oswal said in its report.

On a year-to-date basis, RBL stocks have fared relatively better than the broader banking index, surging over 30%. In contrast, Nifty Bank has surged over 8.6% during the same period.

As per Centrum Broking, NIMs might face pressure in the current fiscal and opex growth will remain controlled. "We build in 15%/14%/7% CAGR in advances, deposits, and book value over FY25– 27E — slightly below guidance. In our view, the market will closely monitor sustainability of the ongoing asset quality improvement," the brokerage firm said while maintaining a 'Buy' rating on the stock.