RBL Bank tumbled 10.93% to Rs 117 after the bank said that it has lost about 8% of its deposits in the March quarter and its cost of deposits also declined on a sequential basis in the same period.
RBL Bank said it has strong operating profit trajectory for Q4 with Net Interest Margin (NIM) at an all-time high and comfortable liquidity position.The bank said its liquidity ratio stood at approximately 127% for March 2020 and its cost of deposits and cost of funds are lower on a quarter-on-quarter (QoQ) basis.
The private lender witnessed some run-offs of deposits in this quarter (under 8%), since the last quarter. The deposit reduction was essentially in bulk deposits from government entities/corporations, while the banks retail deposits remained stable.
"Retail deposit proportion and CASA (current account and savings accounts) ratio is higher sequentially as at March 31, 2020," the bank said in a statement to the stock exchanges made after market hours on Wednesday (1 April 2020). Cost of deposits and cost of funds were lower quarter on quarter (QoQ), it added.
The bank's has not utilised its marginal standing facility and it added that it's well capitalised with total capital adequacy ratios of approximately 16%. As per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.
The bank said, "Asset quality position in legacy book consistent with guidance given in Q3 FY20; no material change. Some increase in slippage in SME (wholesale) and retail largely on account of stress and inability to collect in the last few days because of the lockdown. However, overall, we expect lower slippages QoQ."
It added that it expects to increase provision coverage ratio (PCR) sequentially. The bank's provision coverage ratio stood at 58.07% as on 31 December 2019 as against 58.45% as on 30 September 2019 and 63.22% as on 31 December 2018.
On the future outlook, the bank said that it will be important to focus on balance sheet protection. "Wholesale strategy continuing consolidation and right sizing within portfolio reflecting the changed economic environment. Retail strategy fundamental demand / growth potential in retail and rural expected to come back; we are in the right businesses to leverage this. The bank is allocating capital to build a new line of secured housing business. The bank's focus is on operating leverage and concerted cost rationalisation exercise to be carried out," RBL said in the exchange filing.
Offering details on the impact of COVID-19 on portfolio, the private lender said that with respect to the wholesale advances, detailed review of portfolio being undertaken to assess potential impact. The recent de-bulking exercise has helped significantly reduce concentration risk in the bank's portfolio. Its exposure to sectors such as aviation, hospitality, transport/logistics, and organised retail is low and added that it is closely monitoring exposures as the situation is very fluid.
On the microfinance front, RBL said that collections for March 2020 were largely completed before the lockdown and added that it has been cautious in loan disbursals in March. It shut disbursals early as the lockdown was announced. The bank witnessed negligible COVID issues in rural India. "Customer segment has demonstrated resilience to disruptions & strong bounce back in the past. Loan officers continue to engage with customers to help them counter the difficulties. EMI deferral moratorium IS being offered to all customers. Half our portfolio is originated through our partner banking correspondent's with recourse on first loss," the bank said.
On the credit cards front, the bank had stopped acquisition post the lock down, only digitally sourced cards being booked. The credit cards spends were down to 40% of run rate during the lock down period with spends on groceries, utilities and fuel showing an increase. The bank expects slight increase in credit costs in March and April as collection not able to function effectively during lockdown and added that tightening of risk filters to continue as seen in last three quarters.
On the business loans front, the bank's portfolio continues to be resilient as of now with more than 95% of the portfolio with self-occupied collateral. Its exposure to stressed sector like tours and travel, entertainment is negligible (less than 5%).
RBL's loan-to-value (LTV) ratio is in the 65% range. The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are higher risk and, therefore, if the mortgage is approved, the loan costs the borrower more. Additionally, a loan with a high LTV ratio may require the borrower to purchase mortgage insurance to offset the risk to the lender.
It added that customers whose business cash flows are impacted by COVID being given the option to opt for the moratorium around EMI deferral. The bank is tracking this portfolio closely on bureau to pick up deterioration in risk profile.
RBL Bank is engaged in providing a range of banking and financial services, including commercial banking, retail banking, agriculture finance and financial inclusion, treasury operations and other banking related activities.
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