RBL Bank posts Rs 459 cr June qtr loss due to one-time provisioning

Private sector lender RBL Bank reported a net loss of Rs 459 crore in the June quarter of FY22 due to one-time higher provisions so as to improve its provision coverage ratio to over 60 per cent. In the year-ago period, it had reported a net profit of Rs 141 crore. The bank has, however, said that next quarter it will return to profitability and will make up for the loss in the reporting quarter in the next nine months of the financial year.

The private lender has also said it is scaling up its internal neo-banking initiative, Project Abacus 3x, to take its customer base to 12-14 million over the next 3-4 years. Currently, its card base and deposit base are four million.

The lender's net interest income dropped 7 per cent year-on-year (YoY) to Rs 1,041 crore in Q1FY22 but other income rose 108 per cent to Rs 695 crore. Its net interest margin (NIM) stood at 4.36 per cent, up 19 basis points higher sequentially due to continuous reduction in the cost of funds.

Provisions and contingencies increased sharply in the reporting quarter due to stress from the second Cpvid-19 wave. In Q1FY22, the total provisions that the bank has taken rose to Rs 1,426 crore. It has taken additional provisions of Rs 365 crore and proactive covid provisions of Rs 235 crore, totaling to Rs 600 crore, which the bank thinks would be adequate.

The lender's gross non-performing assets (NPAs) deteriorated to 4.99 per cent in Q1FY22 from 4.34 per cent in Q4FY21. The net NPA fell to 2.01 per cent from 2.12 per cent sequentially.

“Just as the environment was returning to near normalcy in March, we faced the impact of the second wave. It was far more severe than the first wave, especially impacting the small retail borrowers, salaried customers, small businesses, and rural customers, where the impact was the highest. So, the impact that the bank has faced has been somewhat higher than the larger players in the market”, said Vishwavir Ahuja, MD & CEO, RBL Bank, MD&CEO, RBL Bank.

“We decided that this may be the best time to take a firm view and clear the decks for the future. So, we have taken substantial additional provisions. This was a one-time decision to not only shore up provisioning and mitigate stakeholder concerns over our provisioning levels but also to adequately prepare the institution to come back to normalised level of business, provisioning, growth, and profitability”, Ahuja said.

The bank expects to further increase ist PCR to above 65 per cent based on the existing provisioning policies. Currently, the PCR, without technical write-offs increased by 886 bps to 60.94 per cent.

The bank management said collection efficiency in its micro banking segment was impacted significantly due to the second wave of the pandemic.

Slippages of the lender have seen a significant jump in the reporting quarter than what the bank had anticipated. Approximately, 97 per cent of the slippages have come from the retail segment and the rest is from the wholesale book. It has reported gross slippages of Rs 1,342 crore and the net slippage was Rs 1,069 crore.

The bank’s restructuring book at the end of the June quarter stood at Rs 1,152 crore compared to Rs 993 crore in Q4FY21.

The advances book of the lender was flat on a year-on-year basis at Rs 56,527 crore but down 4 per cent sequentially. On the other hand, deposits were up 2 per cent YoY Rs 74,471 crore.