RBL Bank's profit drops 46% on weak core income, margins
What's the story
RBL Bank has reported a massive 46% year-on-year (YoY) decline in its net profit for the June quarter. The private lender's net profit stood at ₹200 crore, compared to ₹372 crore in the same period last year. The sharp fall was mainly due to lower core income and shrinking interest margins, which have weighed heavily on the bank's financial performance.
Financial details
NII falls, but loan book grows
RBL Bank's net interest income (NII) for the quarter fell 13% to ₹1,481 crore. This was due to a 117 basis point contraction in the bank's net interest margin (NIM) to 4.5%, compared with 5.67% last year. However, despite these challenges, the bank managed a 9% growth in its loan book during this period.
Strategic changes
Bank focuses on secured retail loans
RBL Bank's Managing Director and CEO, R Subramaniakumar, said the bank's performance is due to a conscious decision to reduce its high-margin but risky unsecured lending portfolio by 10% in the quarter. He added that the bank is now focusing more on secured retail loans, which have grown by 23%. Despite this challenging quarter, RBL Bank has retained its full-year credit growth guidance of 14-15%.
Financial recovery
Executive says NIMs have bottomed out
A senior bank executive said they expect NIMs to have bottomed out, with a "reasonable improvement" expected due to a better loan mix and possible deposit rate cuts. The bank's slippages during the quarter were ₹1,060 crore, including two small business banking accounts that may revert to standard classification soon. The gross non-performing asset (GNPA) ratio increased to 2.78% as of June 30, from 2.60% in the last quarter.
Financial stability
Provisions up, deposits increase by 11%
RBL Bank's total provisions increased 21% YoY to ₹442 crore, compared with ₹366 crore a year earlier. The bank's capital adequacy ratio was at 15.59%, with a Common Equity Tier-1 (CET1) ratio of 14.05%. Even after facing challenges, RBL Bank has witnessed an 11% YoY increase in deposits, especially from regular customers, while total loans grew by 9%.