RBL Bank Shares Plunge 7% Amid Soaring Credit Costs and Missed Profits

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AuthorVihaan Mehta|Published at:
RBL Bank Shares Plunge 7% Amid Soaring Credit Costs and Missed Profits
Overview

RBL Bank shares dropped over 7% on Monday as quarterly results revealed a significant 40 basis point jump in credit costs, primarily driven by credit card write-offs. Provisions surged 28% to ₹639 crore, leading net profit to miss consensus estimates at ₹214 crore. Management flagged potential further slippages in the credit card portfolio over the next two quarters.

Credit Costs Surge

RBL Bank Ltd. saw its stock price decline by over 7% on Monday, marking its steepest single-day fall since June 2024. The sell-off was primarily triggered by the lender's quarterly financial results. A significant 40 basis point increase in credit costs, pushing the figure to nearly 2.5% sequentially, was a major concern for investors. This rise was directly linked to higher write-offs within the bank's credit card portfolio.

Profitability Pressures

Further compounding the issue, RBL Bank's net profit for the quarter fell short of market expectations. The reported profit of ₹214 crore was considerably lower than the consensus forecast of over ₹260 crore. This shortfall was exacerbated by elevated provisions, which climbed 28% quarter-on-quarter to ₹639 crore from ₹500 crore. An additional one-off expense of ₹32 crore related to new labour laws also impacted the bottom line.

Management's Outlook

The bank's management acknowledged challenges during the earnings call, specifically highlighting pressure on the credit card portfolio due to broader macroeconomic trends. They cautioned that similar trends in loan slippages could be observed over the upcoming two quarters. However, the bank did report sequential growth in cards in force after a six to seven-quarter decline, indicating some underlying demand.

Analyst Assessments

Despite the headwinds, analysts offered mixed views. CLSA maintained its "hold" rating on RBL Bank, setting a price target of ₹310 and describing the quarter as "average" from a balance sheet perspective. Overall, the analyst community remains cautiously optimistic, with 13 out of 22 covering analysts recommending a "buy" rating. Six analysts suggest holding the stock, while three advise selling.

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