Release Date: July 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RBL Bank Ltd (BOM:540065, Financial) reported a 19% YoY growth in advances and a 31% YoY growth in retail advances.
- Granular deposits grew 25% YoY and 5% sequentially, with a focus on increasing this share to over 50% in the coming quarters.
- The bank's net profit for the quarter was 372 crores, up 29% YoY and 5% sequentially.
- The LCR (Liquidity Coverage Ratio) was very healthy at 137% for the quarter.
- The bank's GNPA improved to 2.69% from 3.2% the same time last year, and NNPA was steady at 0.74%.
Negative Points
- Cost of deposits grew 3% YoY, indicating rising funding costs.
- There was a 60 crore increase in slippages compared to Q4, partly due to the transition in collections.
- Collection efficiencies dipped in April and May due to election disruptions.
- The cost-income ratio increased to 65.7% this quarter from 59.3% in Q1 last year.
- Credit costs for the quarter were 59 bps, up from 53 bps last quarter.
Q & A Highlights
Q: Given the tighter deposit environment, are you still confident in achieving 20% loan and deposit growth over the next two years?
A: We are focusing on granular deposits, which have been growing at an average of 25%. We believe this will aid in achieving our growth estimates, even under current circumstances. We expect granular deposit growth to remain in the range of 23% to 25%.
Q: Can you provide the slippages breakdown for this quarter, particularly for MFI, credit cards, and corporate segments?
A: Credit card slippages were around 400 crores, MFI at about 135 crores, and negligible slippages in other segments.
Q: What is the current status of SMA-1 and SMA-2 in microfinance?
A: SMA-2 is in the range of 60 to 65 crores, and SMA-1 is also similar. We are focusing on early bucket collections, and recent reports indicate an improvement in collection efficiency.
Q: What impact did the interest on IT refund have on NIM and other income?
A: The interest on IT refund had a 25 basis points impact on margins, contributing approximately 68 to 70 crores to other income.
Q: What are the expectations for credit costs and asset quality for FY25?
A: We expect credit costs to be in the range of 2.1% to 2.2%. The first half will be similar to Q1, and we anticipate improvement in the second half. We aim to maintain a credit cost within this range.
Q: What is the outlook for margins given the moderation in the card business and MFI?
A: Excluding the impact of the tax interest refund, margins should be flattish sequentially. We expect margins to improve in the second half due to better risk-adjusted returns across portfolios.
Q: How do you plan to manage the increase in business acquisition and collection costs?
A: The increase is partly due to the transition in the card collections infrastructure. We expect these costs to moderate from Q3 onwards as the transition stabilizes.
Q: What are the plans for raising equity capital, and how does it impact your growth strategy?
A: We plan to raise Tier 2 capital this year and will seek shareholder approval for an enabling resolution in the AGM. We are well-capitalized for short and medium-term growth, with no immediate plans for raising equity capital.
Q: What are the key levers to improve ROE to 15% by 2026?
A: The improvement in ROE will depend on our capital cycle. We aim to achieve a 15% ROE through better risk-adjusted returns and efficient capital management, although it may require raising additional capital in the medium term.
Q: What are your strategies for brand building and image enhancement?
A: We are focusing on micro-marketing activities around our branches to create brand recall. Our bank has been recognized among the top 100 brands in the country, and we plan to implement additional strategies to enhance our brand presence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
