RBL Bank declines 4% as MD sells shares worth over Rs 38.5 crore

Ahuja sold the shares mainly to service personal debt and meet family commitments, the bank said

Shares of RBL Bank slipped as much as 4.29 per cent to Rs 201.55 on the BSE on Monday after the private sector lender said its managing director and CEO Vishwavir Ahuja had sold shares worth over Rs 38.5 crore in the bank.

"We have received an intimation from Vishwavir Ahuja, Managing Director and CEO of the bank, mentioning that he has sold 18,92,900 shares of RBL Bank on 27th and 28th of August, 2020 for approximately Rs 38.52 crore," RBL Bank said in a regulatory filing, on Friday. READ THE FILING HERE
 

The sale has been driven primarily with the need to extinguish personal debt obligations and related servicing burden, undertaken over the last few years mainly to exercise and purchase vested ESOPs (and pay associated tax), as well as to take care of some pressing family commitments, the bank said.

The sale represents approximately 18 per cent of his/family's total holdings and Ahuja continues to retain 80,10,000 shares (approximately 1.6 per cent holding) of RBL Bank post the sale of these shares, it added.

"While I have sold a small part of my shareholding in the bank, I strongly believe that RBL Bank has a robust balance sheet and business franchise, is well capitalised and fortified to deal with the economic impact of the prevailing pandemic situation confronting the nation, and extremely well positioned to exploit market opportunities in the short as well as long term," Ahuja said in his intimation addressed to the compliance officer..

At 11:15 AM, the stock was trading 4.04 per cent lower at 202.10 as compared to 0.12 per cent gain in the S&P BSE Sensex. Around 2 crore shares have changed hands on the NSE and BSE so far, combined.

The private sector lender reported a 47 per cent decline in June quarter net profit at Rs 141 crore, owing to excess provisions of Rs 460 crore. The bank said it set aside Rs 240 crore for Covid-19 related provisions, taking the total money set aside due to possible reverses because of the pandemic to Rs 350 crore.

The gross non-performing assets ratio improved to 3.45 per cent as against 3.62 per cent in March, but was higher than 1.38 per cent in the year-ago period.

The bank's core net interest income grew 27 per cent to Rs 1,041 as margins remained strong at 4.85 per cent, while non-interest income declined 33 per cent to Rs 334 crore because of the pandemic. The overall capital adequacy stood at 16.35 per cent, with core tier-I ratio at 15.16 per cent.

In a post-results report dated July 28, Emkay Global Financial Services recommended 'Hold' rating on the stock with the target price of Rs 195.

"Loan growth remains subdued due to Covid-19-led disruptions and continued de-bulking of the corporate book. However, the bank has recovered from the deposit scare in Q4, with 7 per cent QoQ growth and CASA touching 30 per cent for the first time. The overall moratorium rate fell to 13.7 per cent from 33 per cent in value terms, but remains sticky for Cards at 22 per cent. Cumulative contingent provisions now stand at Rs 350 crore (up Rs 240 crore during Q1), 60bps of loans, which we believe need to be further accelerated," the brokerage said.

"With the deposit scare largely behind, we believe that the stock will now largely track the asset quality performance, with risk on its retail book likely to remain higher," it said.

HDFC Securities, on the other hand, said the near-term pain was inevitable for the bank, and, as such, the brokerage had a 'REDUCE' rating on the stock. The target price of Rs 148, however, remained unchanged.

"Significant treasury gains and strong NIMs buoyed RBK’s Q1 earnings. While QoQ deposit growth was healthy, deposit granularity remains an area of concern. Moratorium trends in the credit card and micro-credit portfolios, where LGDs are high, are concerning. These segments could contribute disproportionately to slippages and LLPs. Provisions are likely to remain elevated in the near term, denting return ratios. This underpins our REDUCE rating," it said.