My Application Form StatusCheck the status of your application form with Angel Broking.
RBL Bank Ltd (RBL), the erstwhile Ratnakar Bank, has emerged as one of the fastest growing private sector banks in the last six years. Members of the new Management team, with their experience across multinational and other private banks, have played an instrumental role in the metamorphosis of the bank . Focused approach will keep growth momentum on; RBL has been largely focusing on catering to the funding and working capital needs of large as well as mid-sized corporates. It has also bought the credit card & mortgage business of The Royal Bank of Scotland (RBS) and has been expanding the same along with other new retail products which now account for 17% of its total advances. Further, 15% of the bank’s book, ie ~Rs3,133cr, is accounted by the high yielding microfinance segment, which is likely to help in yielding a better ROE, going ahead. Strong Management team with vast experience: During 2010, the new Management team took over charge led by MD & CEO Mr Vishwavir Ahuja, who previously served as MD & Country CEO of Bank of America for the Indian subcontinent. Under his vision and leadership, the bank adopted a new approach and transformed itself from being a traditional bank to a new age bank competing with other private sector banks. Growth without a compromise in asset quality: While the new Management has been aggressive in expanding the loan book, it also put in place an efficient risk management system which has led to GNPAs being contained below 1% in the last four years. For FY2016, GNPAs at 0.98% and NNPAs at 0.59% are very much comparable to that of new age private sector banks. CASA ratio still low, but there lies scope for improvement: The bank has a low CASA base of 18.6%, but it’s been growing at a CAGR of ~45%. It has been observed in the banking industry, particularly with many private sector banks, that the CASA ratio tends to improve as the business matures. We expect RBL to be able to scale up its CASA going forward, albeit at a slower pace than other private banks. Our calculated NIM for the bank at 2.54% also seems to have lot of scope for improvement, as cost of funds eases going ahead. Enough scope for a decline in cost/income ratio: The new Management has inducted fresh talent from other private sector banks and has also invested heavily in technology, along with branch expansions. Number of branches & employees count has been increased by2x & 3x over FY11-16. This has resulted in the cost to income ratio rising to 70% by FY2014 from 55% in FY2012; for FY2016, it stood at 58%. With growth in business, we expect the bank to avail to economies of scale and this should unearth enough scope for improvement in the cost structure, which in turn would add to the bottom-line. ROA of 0.9% and ROE of 11.4% seems suboptimal and leaves scope for improvement. Outlook Valuation: At the upper end of the price band, ie Rs225, the stock is offered at 2.4x its pre-IPO BV, while on post IPO BV it’s offered at 2.1x. We believe the issue is attractively priced taking into account the valuations at which other mid-sized private sector banks are currently trading. To add to it, given the growth prospects of the bank, we recommend a SUBSRIBE to the issue.Download Full Report