RBL Bank Q4 Results: Profit Falls 54% On Higher Provisions
The bank’s asset quality deteriorated modestly in fourth quarter.
RBL Bank Ltd. reported a smaller profit for quarter ended March as the private lender increased provisions for bad loans in a virus-struck economy.
Net profit fell 54 percent to Rs 114 crore in the fourth quarter of 2019-20 compared to a profit of Rs 247 crore in the same quarter last year. A consensus estimate of analysts tracked by Bloomberg had pegged net profit at Rs 87 crore.
The bank’s net interest income, or core income, rose 38 percent to Rs 1,021 crore compared to Rs 739 crore in the year-ago period. This was higher than the Rs 949-crore estimate.
Asset Quality
The bank’s asset quality deteriorated modestly in fourth quarter.
Gross NPA ratio rose to 3.62 percent in the March ended quarter from 3.3 percent in the preceding quarter. The net NPA ratio stood at 2.06 percent from 2.07 percent earlier.
Slippages during the quarter stood at Rs 700 crore in the fourth quarter compared to Rs 1,050 crore in the previous quarter.
During the quarter the bank set aside Rs 614 crore in provisions, compared to Rs 638.29 crore in the December quarter. The provisioning coverage ratio rose to 64 percent, the bank said.
Ahuja said that the moratorium was extended to all customers in the agricultural and rural loan portfolio. These customers are expected to return to regular repayments after the moratorium ends, Ahuja said.
About 13 percent of the bank’s credit card customers have availed of the moratorium and 46 percent of the retail loan customers have taken the benefit. About 23 percent of the bank’s wholesale loan book by value is under moratorium.
Ahuja said he sees no direct link between the proportion of customers applying for the moratorium and eventual defaults due to economic stress caused by Covid-19.
“We have done a detailed bottom-up analysis of our portfolios on the wholesale and retail side. On the corporate side, we have walked in to the year with a cleaned-up book. On the retail side the bank could see some increase in stress, but we believe our portfolio is superior and should be able to withstand any stress,” Ahuja said.
Taken together, the credit cost for the bank stood at 340 basis points in FY20.
Loans & Deposits
The bank, which over the last quarter, saw some concerns about deposit outflows said that its liability franchise was stable. Outflows on account of a few states deciding to park funds only in government-owned banks had hurt RBL Bank, among others.
Total deposits fell 1 percent over a year ago to Rs 57,812 crore. Current account and savings account deposits rose 17 percent year-on-year and 2 percent quarter-on-quarter. CASA deposits stood at Rs 17,116 crore as of the end of March 2020.
Together, the share of retail term deposits and CASA deposits was 59 percent, the bank said. “We have fully recouped any outflows in deposits seen in the month of March,” said Ahuja.
The bank’s advances grew 7 percent over a year ago to Rs 58,019 crore. Non-wholesale advances grew 35 percent and accounted for a little more than half of the bank’s book. Retail loans rose 41 percent over a year ago.
Comfortable Capital Position
While some private lenders have looked to raise capital due to fears of increased stress in the economy and the banking system, Ahuja said that RBL has adequate capital and does not intend to tap the markets immediately.
The bank’s capital adequacy ratio stands at 16.45 percent and its common equity tier-1 ratio stands at 15.33 percent.
The bank added that it is holding adequate liquidity. Its average liquidity coverage ratio, or the proportion of highly liquid assets it holds compared to projected outflows, stood at 161 percent in the fourth quarter.