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RBL Bank Ltd

| Q3 FY 26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤17th Jan 26

Summary : RBL Bank reports Q3 FY26 growth in advances and deposits, with strategic branch expansion and capital infusion plans, while addressing elevated credit card slippages.

Management Perspective positive : Management repeatedly expressed confidence in their strategy, growth trajectory, and ability to resolve challenges, stating they are 'firmly on the right trajectory' and 'confident of continuing this gradual normalization'.

Concall Report Analysis & Insights

Business Overview

  1. Advances grew 14% Y-o-Y, deposits grew 12% Y-o-Y, with CD ratio at 86.1%.
  2. Granular deposits grew 15% Y-o-Y, now constituting 51.5% of total deposits.
  3. Secured retail assets grew 25% Y-o-Y; commercial banking grew 30% Y-o-Y.
  4. Achieved over 1 lakh credit card acquisitions in a single month, with INR7,000 crores monthly spends.
  5. Net profit for the quarter was INR214 crores, with GNPA at 1.88% and net NPA at 0.55%.

Future Growth Prospects

  1. Accelerated branch expansion, targeting 1,000 branches by third year for retail growth.
  2. RFL is gaining traction as a meaningful contributor to secured loan sourcing.
  3. Expects margins to be marginally better next quarter due to improved disbursals.
  4. Priorities include building granular liabilities and a balanced retail asset mix.
  5. Credit card book expected to achieve sustainable 10-15% annual growth.

Management Insights

  1. "We have adopted a calibrated approach to deposit repricing for gradual normalization."
  2. "Overall, we believe we are firmly on the right trajectory with multiple growth opportunities."
  3. "We are quite comfortable with the provisioning guidelines that we have."
  4. "Credit card stress expected to pick out in June, normalize by September."
  5. "Collection infrastructure is strong, not a weakness, with outcomes 5% better than Bajaj's."

Signs of Skepticism

  1. Analysts questioned why credit card slippages have not normalized yet, despite management's earlier expectations.
  2. Analysts probed if RBL's card portfolio is lagging the industry in terms of asset quality and growth.
  3. Questions arose regarding the flow-in of cost of deposits benefit, as it has been minimal so far.
  4. Analysts sought clarification on the retail liability constitution, noting a marginal deterioration.

Risk Factors

  1. Credit card slippages remain slightly elevated, expected for 2 more quarters.
  2. Certain pockets of the credit card portfolio are exhibiting weakness.
  3. Net NPA increase expected in microfinance from legacy portfolios.
  4. Full impact of the December repo rate cut will be felt in Q4 FY '26.
  5. CASA ratio on a daily average basis presents a challenge in the industry.

Good To Know

  1. Shareholder approval received for Emirates NBD Bank capital infusion in November 2025.
  2. Applications for regulatory approvals are pending with RBI, Government, CCI, and SEBI.
  3. Two separate approvals are needed: transaction consummation and branch amalgamation.
  4. The bank is working on RBI guidelines for IFRS accounts post transaction consummation.

Key Drivers

  1. Capital infusion from Emirates NBD.
  2. Accelerated branch network expansion.
  3. Improved collection efficiency in JLG.
  4. Growth in secured retail assets.

Key Analyst Discussions

Competitive Environment

  1. Questions on whether the bank's collection infrastructure is comparable to Bajaj Finance's.
  2. Inquiries about the RBL card portfolio's performance relative to the broader industry.

Market Trends & Consumer Behavior

  1. Questions about the shift of customer deposits from Savings Accounts (SA) to Term Deposits (TD) due to rate cuts.
  2. Inquiries regarding the impact of macroeconomic weakness on credit card collections.

Financial Highlights

  1. Questions on the expected settlement level of the Provisioning Coverage Ratio (PCR) for the next year.
  2. Inquiries about the overall impact of ECL transitioning and cost of deposits benefit flow-in.
  3. Questions regarding the NIM expansion despite a drop in yield and the impact of CRR cut.
  4. Queries on the provision held for loans with DCCO extension and retail liability constitution changes.

Product Composition

  1. Questions about the product-wise profitability and breakeven status within the retail secured portfolio.
  2. Inquiries about the future retail/wholesale mix post capital infusion and strategic direction.

Strategic Considerations

  1. Questions regarding the deployment of funds from the capital infusion expected in 1Q FY '27.
  2. Inquiries about the timelines for branch expansion strategy and expected growth acceleration.
  3. Questions on the confidence in credit card asset quality improvement over the next two quarters.
  4. Queries about the growth strategy for wholesale and secured retail banking in the long term.