RBL Bank's April-June Profit Slumps 46% On Year As Asset Quality Woes Persist

RBL Bank Ltd. on Saturday reported a 46% on-year decline in net profit for the June quarter, reflecting continued stress in its microfinance portfolio. A sharp rise in net slippages and a spike in the slippage ratio indicate that the private lender is still grappling with asset quality challenges.

The bank reported a net profit of ₹2.00 million for the quarter, beating Street estimates of ₹1.70 million. This compares with ₹3.72 million in the year-ago period. Sequentially, profit rose 192%, as slippages in the joint liability group portfolio “moderated”, according to Managing Director and Chief Executive Officer R. Subramaniakumar.

Net slippages increased to ₹9.18 million in the April-June quarter from ₹7.30 million a quarter ago. The bank’s slippage ratio climbed to 0.99% from 0.81% in January-March and 0.63% a year earlier.

RBL Bank has been battling elevated slippages in its microfinance book for at least three consecutive quarters. As a result, the gross non-performing assets ratio rose to 2.78% as of June 30 from 2.60% a quarter ago. The net non-performing assets ratio also increased to 0.45% from 0.29%.

Provisions rose 21% on year to ₹4.42 million in the reporting quarter. However, they were down 44% sequentially, supporting a quarter-on-quarter rise in net profit. The bank has created a contingent provision of 1% on joint liability group loans, totalling ₹540 million. Provision coverage stood at 84.03% as of June 30. Credit cost improved to 0.50% from 0.93% a quarter earlier. Recoveries dropped to ₹890 million from ₹2.35 million.

The bottom line was also hit by a decline in core income. Net interest income fell 13% on year to ₹14.81 million in April-June.

However, other income jumped 33% to ₹10.69 million, driven by treasury gains. Net interest margin declined to 4.50% from 4.89% in January-March and 5.67% a year ago.

Total advances rose 9% on year to ₹944.31 million. Secured retail loans were up 23% on year, while unsecured retail loans fell 10%. Retail-to-wholesale advances stood at a 60:40 ratio. Wholesale loans rose 15% on year to ₹378.07 million, and retail loans were up 5% to ₹566.25 million.

Total deposits grew 11% on year to ₹1.13 trillion, with low-cost current and savings account (CASA) deposits also up 11% at ₹366.14 million. The CASA ratio stood at 32.5%. The cost of deposits was flat at 6.53% on both a quarterly and yearly basis.

The lender said it remained well-capitalised to support medium-term growth. The total capital adequacy ratio rose 3 basis points to 15.59% on year, and the common equity tier-I ratio improved 20 bps to 14.05%. The average liquidity coverage ratio stood at 152% in the June quarter.