RBL Bank Shares Plunge 13% Amidst Microfinance Woes RBL Bank shares have delivered negative returns across multiple time frames. Over the past month, the stock has fallen by 15.21%, and in the last six months, it has dropped by 30.10%, continuing its downward trend. Year-to-date, shares are down by 36.39%, while over the past year, they have declined by 27.68%.

Today, the stock fell by 13%, hitting an intra-day low of Rs 176.50 on the NSE after the announcement of its Q2FY25 results. The bank reported a 24% year-on-year (YoY) decrease in profit after tax (PAT), down to Rs 223 crore for the quarter ending September 2024. Despite this, RBL Bank’s net interest income (NII) grew by 9% YoY, reaching Rs 1,615 crore, with net interest margins (NIMs) of 5.04%. The bank’s operating profit also saw a 24% YoY growth, reaching Rs 910 crore.

For the first half of FY25 (H1FY25), RBL Bank’s net profit increased by 2% YoY to Rs 594 crore, with NIMs at 5.35%. Operating expenses rose by 13% YoY in both H1FY25 and Q2FY25, totaling Rs 3,279 crore and Rs 1,632 crore, respectively.

On the asset quality front, the bank showed improvement with a reduction in its gross non-performing asset (NPA) ratio to 2.88% in Q2FY25, down from 3.12% in the same quarter last year. The net NPA ratio slightly increased to 0.79% from 0.78% in Q2FY24. Additionally, the bank’s current account savings account (CASA) grew by 13% YoY to Rs 36,224 crore, with a CASA ratio of 33.6%, while total deposits rose by 20% YoY, reaching Rs 1.08 lakh crore by the end of Q2FY25.

RBL Bank Shares Plunge 13% Amidst Microfinance Woes In the July-September quarter of FY25, RBL Bank reported a 24.3% year-on-year decline in net profit, dropping to Rs 222.52 crore. Sequentially, net profit fell by 40.11%. On October 19, the bank’s management expressed optimism that the stress in the microfinance segment would stabilize by the fourth quarter of the fiscal year.

“We are maintaining a higher contingency buffer for both credit cards and microfinance. We expect the microfinance situation to stabilize by Q3 or early Q4, and by the end of Q4, we should reach normalized levels,” management stated during the post-earnings call.

In the July-September quarter, RBL Bank observed an increase in non-performing assets (NPA) within its microfinance and credit card portfolios. According to their investor presentation, gross NPAs in microfinance rose to Rs 549 crore, compared to Rs 407 crore in the previous quarter and Rs 151 crore in the same period last year. Similarly, gross NPAs in credit cards increased to Rs 474 crore, up from Rs 359 crore in the prior quarter and Rs 462 crore a year ago.

Slippages during the quarter surged to Rs 1,026 crore, with approximately 65-70% from credit cards and around 30% from microfinance. The management acknowledged potential further slippages in microfinance over the coming quarters but anticipated stabilization by Q4.

The bank follows a conservative provisioning policy, setting aside 70% for NPAs in credit cards, with 100% provisioning by the 120th day. For microfinance, it provisions 25% each quarter, achieving full coverage within a year.

During the quarter, RBL Bank’s net interest income (NII) grew by 9% year-on-year to Rs 1,615 crore, up from Rs 1,475 crore in the same period last year. However, NII saw a 5% sequential decline, which the bank attributed to interest reversals from slippages and lower disbursals in the microfinance segment.