RBL Bank Share Price Jumps 7% Despite 80% Drop in Q4 Net Profit

RBL Bank's share price showed remarkable resilience, surging 7% to ₹201.25 per share despite reporting a significant 80% decline in its Q4FY25 net profit. This performance exceeded expectations and generated investor interest, providing insights into the key factors behind the surge in share price.

Key Performance Highlights

• Q4 Net Profit: RBL Bank's standalone net profit for the March quarter fell sharply to ₹68.7 crore, compared to ₹353 crore in Q4FY24, reflecting an 80.5% year-over-year (YoY) drop.
• Credit Costs: Credit costs were 3.4% for Q4FY25, up from 2.0% in Q4FY24 but showing improvement compared to 5.3% in Q3FY25.
• Non-Interest Income (NII): Despite the drop in profits, NII exceeded expectations, helping offset the negative impact of high credit costs.

Why Did the Share Price Increase?

RBL Bank's positive stock performance can be attributed to several key factors:

• Improved Asset Quality: The bank saw a quarterly reduction in gross slippages by 130 basis points. The Special Mention Account (SMA) pool for the JLG book also shrank, signaling potential improvements in asset quality.
• Contingent Provisions: The bank utilized ₹273 crore in contingent provisions, leading to an increase in its Provision Coverage Ratio (PCR) by 700 basis points quarter-on-quarter, reaching 89%.

Q4FY25 Financials

• Net Interest Income (NII): ₹1,560 crore (down 2.5% YoY, down 1.3% QoQ).
• Profit Before Provisioning (PPoP): ₹880 crore (down 2.3% YoY, up 1.3% QoQ).

Despite the decrease in NII, the slight uptick in PPoP compared to expectations helped cushion the impact on the overall financial performance.

Looking Ahead: RBL Bank's Outlook for FY26

RBL Bank is aiming for a 16-18% loan growth in FY26, driven primarily by growth in its secured retail assets and wholesale lending. However, the bank also expects some pressure on Net Interest Margins (NIMs) in FY26, though operational expenditure (OPEX) growth is expected to remain controlled.

The bank's management has signaled that the worst credit cost cycle is behind, suggesting that FY26 could see improved profitability and growth.

Summary

Despite a sharp drop in net profit, RBL Bank's share price surged by 7%, driven by better-than-expected non-interest income and signs of asset quality improvements. As the bank navigates through its credit cost cycle, investors are hopeful that FY26 will bring a stronger financial performance.