Buy RBL Bank, target price Rs 235: Motilal Oswal

Motilal Oswal has buy call on RBL Bank with a target price of Rs 235. The current market price of RBL Bank is Rs 190.85. Time period given by analyst is one year when RBL Bank price can reach defined target.

RBL Bank Ltd., incorporated in the year 1943, is a banking company (having a market cap of Rs 11642.23 Crore).

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 2804.57 Crore, up 3.68 % from last quarter Total Income of Rs 2704.90 Crore and up 5.64 % from last year same quarter Total Income of Rs 2654.88 Crore. The bank reported net profit after tax of Rs -462.25 Crore in latest quarter.


Investment Rationale
RBL Bank reported a weak quarter on higher slippage and accelerated provisions towards the unsecured portfolio. Business growth remained muted even as margins witnessed sequential improvement. RBL guided for a change in business strategy, with an increasing focus on Home Loans, Credit Cards, and other secured assets. On the contrary, it would de-risk the loan book by pruning the unsecured portfolio mix (other than Cards/MFI business). While collection efficiency is improving, the high mix of unsecured loans, coupled with a high BB and below book, keeps the brokerage watchful of asset quality trends over the near term. It cuts earnings estimates sharply by 72% for FY22, factoring in higher credit costs (5.3%) and subdued loan growth. It expects the bank to deliver FY23E RoA/RoE of 1.3%/11.6%.


Promoter/FII Holdings
Promoters held 0 per cent stake in the company as of June 30, 2021, while FIIs held 32.2 per cent, DIIs 23.5 per cent and public and others 44.3 per cent.