Why Did RBL Bank See Its Biggest Ever Intraday Fall Despite 41% Jump In Q1 Profit?

On Friday, shares of RBL Bank slipped 14.4 percent, its biggest intraday fall, to Rs 496.40 apiece on NSE after the release of its financial results for the June quarter. The stock closed 13.76 percent lower at Rs 500.

The steep fall comes despite the Mumbai-based scheduled commercial bank's 41 percent increase in net profit for the first quarter of the fiscal year 2019-20 to Rs 267.10 crore. The results were in line with street estimates.

Its net interest income, that is, the difference between interest earned and interest paid, rose by 48 percent to Rs 817.3 crore, with net interest margin at an all-time high of 4.3 percent.

The lender's provisions and contingencies increased by 51.89 percent on a year-on-year basis to Rs 213.18 crore in the June-ended quarter as against Rs 140.35 crore.

Asset quality remained stable as gross non-performing assets (NPAs) stood at 1.38 percent of gross advances and net NPAs fell 0.65 percent, similar to the results seen in the previous quarter.

However, slippages were high at Rs 225 crore in the April-June period when compared to Rs 206 crore in the previous quarter. Write-offs were also higher at Rs 147 crore as against Rs 91 crore in the March quarter.

Further, the management signaled towards weakness going forward due to tight liquidity which hurt investor sentiments and caused the sharp decline in share prices.

In its BSE filing, Vishwavir Ahuja, MD & CEO of RBL Bank said, "The bank has had a good quarter of strong performance and has continued to maintain its growth momentum and improvement in operating metrics. However, given the difficult environment, we do expect to face some challenges on some of our exposures in the near term."

At a press conference, Ahuja said that RBL Bank will see a slight deterioration in corporate exposures in the next 2 to 3 quarters. "Tight liquidity and volatile equity market are impacting the liquidity of some of the clients."

The bank is cautious of some of its corporate accounts becoming NPAs in the next 9 months.

"We could incur additional 35-40 bps credit cost owing to additional provisioning requirements. Gross NPAs could rise to 2.25-2.50 percent over the course of the year, but capital position continues to be comfortable," he added.

The relative strength index on the stock from Bloomberg data indicated that the shares may have been oversold on Friday.