MOSL: RBL BANK (Buy)-In-line performance, earnings momentum on track

RBL Bank: In-line performance, earnings momentum on track

(RBL IN, Mkt Cap USD3.4b, CMP INR556, TP INR650, 17% Upside, Buy)

• RBL's 1QFY19 PAT grew 7%/35% QoQ/YoY to INR1.9b (in-line). NII grew 46% YoY to INR5.5b, helped by 36% advances growth and 6bp QoQ NIM expansion to 4.04%.
• Total income grew 27% YoY, led by fee income growth of 59% YoY (driven by 145% growth in distribution/CC fees). Opex growth trailed income growth sequentially (CI ratio of 50.8% v/s 52.8% in 4Q), leading to PPoP growth of 13%/39% QoQ/YoY.
• Absolute GNPA increased 5% QoQ (1.4% of loans, flat QoQ). Fresh slippages stood at INR1.5b (1.9% annualized), while recoveries and write-offs came in at INR570m and INR610m, respectively. NNPA rose 1% QoQ to INR3.1b (0.75%, -3bp QoQ) in 1QFY19, as RBL provided further on its MFI portfolio, taking up PCR by 284bp QoQ to 60.4%. RBL guided for further provisions toward the balance one-third stressed MFI loans over 2Q/3Q, while credit cost in the rest of the portfolio is likely to trend lower.
• Loan growth was led by non-wholesale book growth of 37% YoY, increasing the share of non-wholesale to 40.8% from 40.4% a year ago. CASA growth remains healthy at 40% YoY, while CASA mix improved 8bp QoQ to 24.4% (SA cost: 6.2%).
• Other highlights: a) Tier 1 ratio stood at 13.1%, with CRAR of 14.23%. b) Cards portfolio grew to ~1m.