RBL Bank Q2 results: Net profit increases 46%, aided by rise in core income

Provisions rise amid strategic shift in advances

RBL Bank on Saturday reported a 46 per cent year-on-year (y-o-y) surge in net profit for the quarter ending September, amounting to Rs 294 crore, mainly on the back of a rise in net interest income. Net Interest Income grew by 26 per cent y-o-y and 4 per cent quarter-on-quarter (q-o-q) to Rs 1,475 crore. Net Interest Margin was 5.54 per cent, against 5.02 per cent for Q2 FY23.

Notably, provisions for the quarter ending September rose more than 2.6 times to Rs 640 crore, against Rs 241 crore in Q2 FY23.

This surge in provisions was driven by the creation of contingent provisions in the bank's microfinance and credit card segments, accounting for 1 per cent of the total advances of Rs 252 crore. Additionally, the bank altered its credit card provisioning policy, setting aside full provisions for non-performing assets at 120 days, resulting in an extra provision of Rs 48 crore. The bank received a tax provision write-back of Rs 222.92 crore (pre-tax of Rs 297.89 crore), which contributed to these additional provisions.

R Subramaniakumar, the managing director and chief executive officer of RBL Bank, said that the underlying asset quality remains robust. Despite an expected increase of 20 basis points in the cost of deposits, Subramaniakumar remained optimistic, citing the bank's strategic shift towards medium and high-yielding advances as a factor that would help improve net interest margins.

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"Our underlying asset portfolio remains robust and we don't find any stress as we speak today… There will be an increase in our cost of deposits by 20 basis points, but we are confident in improving our net interest margins due to our changing mix of advances, which are moving away from wholesale to medium and high-yielding advances," he said.

The Gross Non-Performing Assets (NPA) ratio of the bank declined to 3.12 per cent y-o-y during the quarter, against 3.80 per cent during the same period last financial year. The Net NPA ratio fell to 0.78 per cent during Q2 FY24, against 1.26 per cent in Q2 FY23.

Yield on assets was 1 per cent for the quarter against 0.8 per cent for the corresponding quarter of the previous financial year. Cost of funds was at 6.33 per cent against 5.19 per cent.

Subramaniakumar said that credit costs for the year are expected between 1.5–2 per cent, whereas, Net Interest Margins (NIMs) are expected to be in the range of 5.5–5.6 per cent going ahead.

Total deposits rose 13 per cent year-on-year to Rs 89,780 crore. Subramaniakumar said that the bank expects an 18 per cent growth in deposits by the year-end.

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The current account savings account (CASA) deposits rose by 12 per cent to Rs 32,089 crore. CASA ratio stood at 35.7 per cent, down 50 basis points from 36.2 per cent in Q2 FY23.

Advances as of September 30, 2023, were Rs 76,324 crore, an increase of 21 per cent over September 30, 2022.