Release Date: October 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RBL Bank Ltd (BOM:540065, Financial) reported a robust growth in secured retail assets, increasing from INR10,000 crores in September 2022 to INR23,000 crores in September 2024.
- The bank's granular deposits grew by 22% year-on-year, with total deposits increasing by 20% over the last year.
- RBL Bank Ltd (BOM:540065) has successfully reimagined its wholesale banking approach, focusing on well-rated clients and mid-sized corporates, leading to a self-funded and derisked business model.
- The bank's branch banking business continues to drive granular deposit growth without compromising on deposit rates, despite a challenging deposit environment.
- RBL Bank Ltd (BOM:540065) has made significant progress in diversifying its revenue streams, with newer secured products like affordable home loans and small business loans reaching 15% of disbursements.
Negative Points
- The bank faced near-term challenges in credit card slippages due to the transition of collection services, impacting credit quality.
- Microfinance business experienced asset quality issues due to borrower over-leverage and multiple lenders, affecting near-term performance.
- RBL Bank Ltd (BOM:540065) reported higher-than-normal provisioning primarily due to slippages in cards and microfinance, leading to increased credit costs.
- The bank's net profit for the quarter was down 24% year-on-year, impacted by increased provisioning and credit costs.
- RBL Bank Ltd (BOM:540065) anticipates continued pressure on microfinance slippages in the near term, with expectations of improvement only by Q4.
Q & A Highlights
Q: The credit card acquisition run rate has slowed down by 40% YoY. Despite new additions to co-branded partnerships, is this the new acquisition run rate, or can it further accelerate?
A: We are consciously focusing on mining the existing portfolio rather than just growth. With a base of 5.5 million customers, we aim to optimize the portfolio and leverage these customers for multiple products. The new co-brand acquisitions are recent and will take time to scale. We expect to acquire 12 to 15 lakh new cards annually, rather than the 20-plus lakh previously.
Q: On microfinance, the top three state exposures are materially higher than peers. What are the other two states besides Bihar, and is there a diversification plan?
A: Besides Bihar, the next two states are UP and Rajasthan, both showing improved collection efficiency. We have a diversification plan, entering states like Tamil Nadu and Karnataka, where microfinance is growing. This will take time as we establish branches and manpower.
Q: Can you provide clarity on the growth in staff costs and how should one look at it?
A: In Q1, we had reversals due to excess provisioning on bonuses, which suppressed costs. In Q2, we gave employee hikes effective July 1, and added 800-900 employees in collections. Going forward, the delta will be less, reflecting expansion in branch banking and retail.
Q: What is the impact of the collection transition on credit card slippages, and is it complete?
A: The transition was completed on July 31. Early delinquency trends have returned to pre-transition levels, indicating a material reduction in slippages in Q3. We expect to return to normalcy by Q4.
Q: How should we think about capital positioning, especially if RBI increases risk weights on the MFI portfolio?
A: If risk weights increase, it would impact capital by about 40 basis points. We plan to burn around 20 basis points per quarter. We aim to maintain a core equity Tier 1 in the 12.5% to 13% range over the next 12 to 15 months before considering a capital raise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
