RBL Bank shares plunge 8% despite 170% jump in Q2 profit. Should you buy, sell or hold?

Shares of private lender RBL Bank declined as much as 8% to Rs 388 on the BSE on Tuesday after it reported a sharp 170% increase in net profit for the second quarter of FY27, with earnings rising to Rs 481.7 crore from Rs 179 crore a year earlier.

The growth was supported by a strong rise in net interest income (NII), alongside an improvement in asset quality. NII increased 37.4% year-on-year (YoY) to Rs 2,131 crore in the September quarter, compared with Rs 1,551 crore in the same period last year.

The bank's asset quality also improved during the quarter. Gross non-performing assets (GNPA) declined to 1.02% from 1.3% in the previous quarter, while net non-performing assets (NNPA) fell to 0.29% from 0.37%. However, provisions rose to Rs 766.5 crore in the September quarter, up from Rs 599.2 crore in the preceding quarter and Rs 499.7 crore a year earlier.


RBL Bank's net advances grew 42% YoY to Rs 1,42,314 crore. Retail advances increased 32% to Rs 79,465 crore, while wholesale advances rose 56% to Rs 62,849 crore. Within the retail portfolio, secured advances grew 52%, compared with 6% growth in unsecured advances.

Total deposits climbed 34% YoY to Rs 1,56,272 crore, with the current account and savings account (CASA) ratio at 27.2%. Granular deposits, defined as deposits below Rs 3 crore, increased 16% to Rs 68,877 crore and made up 44% of total deposits.

The bank's total capital adequacy ratio stood at 30.1% as of September 30, compared with 33.3% at the end of June. The Common Equity Tier 1 (CET1) ratio declined to 29% from 32.2% in the previous quarter. The average liquidity coverage ratio (LCR) for Q2 FY27 was 148%.

RBL Bank MD and CEO R Subramaniakumar said the quarter saw strong growth across assets and liabilities, reflecting the resilience of the bank's franchise. He added that significant mobilisation of FCNR deposits strengthened the bank's funding profile and provided greater flexibility to support future growth. He attributed the progress to rising customer trust, the commitment of employees and the bank's continued efforts to build a stronger and more relevant franchise.

What is Nuvama saying?

Nuvama has raised its target price on RBL Bank to Rs 500 from Rs 470, while retaining its ‘BUY’ rating. The brokerage believes the Emirates NBD (ENBD) acquisition and FCNR deposit mobilisation mark a structural turning point for the bank, providing a sustainable funding advantage, greater scale and improved margins. Combined with improving asset quality, these factors could lift return on assets (RoA) to 1–1.6% and return on equity (RoE) to 7–11% over FY27–29E, supporting a further re-rating.

The revised target price is based on 1.6 times the estimated adjusted book value (ABV) for September 2028, compared with the earlier valuation based on 1.6 times the estimated ABV for June 2028.

RBL Bank's stock has gained following the ENBD acquisition, while the bank has used the FCNR (B) deposit window to strengthen its non-resident Indian franchise, leveraging ENBD's strong presence in the Middle East. Nuvama expects this strategic shift to strengthen the bank's liability profile structurally, supporting margin expansion and an improvement in RoA over the medium term.

Dolat Capital has maintained a ‘Sell’ rating with a target price of Rs 320, implying a downside of 19%. The brokerage has raised its earnings estimates, primarily due to lower operating expenses resulting from a reduced unsecured loan mix and strong growth in the corporate book. However, it expects return on assets expansion to remain limited following the capital raise, while return on equity is projected to stay subdued at around 7% in FY27, FY28 and FY29. Dolat Capital believes the current valuation of 1.4 times FY28 estimated price-to-book adequately factors in normalised leverage levels but does not account for pressure on yields and margins as the unsecured loan mix declines. The portfolio yield is below 12%, compared with around 21% for unsecured loans.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.