RBL Bank Q2 profit falls 73%

Private sector lender RBL Bank's July-September quarter profit fell sharply by 73.4 percent year-on-year due to a sharp spike in provisions, and asset quality also deteriorated sequentially.

Profit during the quarter declined to Rs 54.31 crore, against Rs 204.54 crore reported in the year-ago period. Other income (up 32.5 percent) and pre-provision operating profit (up 41.6 percent) continued to support profitability in Q2.

The lender had highlighted a few months ago, given the difficult corporate credit environment it had faced challenges in a few corporate accounts.

"As a matter of prudence, we have taken higher than required provisions on these accounts which have impacted our bottomline," Vishwavir Ahuja, MD & CEO, RBL Bank said.

The bank expects to return to normalised earnings trajectory by end of this fiscal, he added.

But net interest income remained strong at Rs 868.69 crore for the quarter ended September 2019, rising 46.5 percent compared to year-ago.

Advances grew by 27 percent year-on-year and deposits growth stood at 31 percent in Q2 with CASA ratio improving to 26.45 percent as of September 2019 from 24.51 percent in the same period last year.

Asset quality deteriorated sharply during the quarter with gross non-performing assets (NPA) as a percentage of gross advances rising 122bps sequentially to 2.6 percent and net NPA climbing 91bps QoQ to 1.56 percent in Q2.

The bank expects stress of Rs 1,800 crore in books, including from 4 groups. Approximately Rs 800 crore of Rs 1,800 crore has been recognised as NPA in Q2," it said.

Provisions and contingencies increased significantly to Rs 533.3 crore in the quarter ended September 2019, against Rs 139.68 crore in the same period last year and Rs 213.18 crore in June quarter this year.

"Total outstanding of real estate approximately Rs 2,500 crore is fully secured. We don't have real estate account case in SMA 1 or SMA 2 in this portfolio," RBL said.

Total outstanding of the construction sector is approximately Rs 4,000 crore and outstanding from housing finance companies is approximately Rs 900 crore, with an average ticket size of Rs 115 crore, it added.

Profit missed analyst expectations due to higher provisions, but net interest income beat estimates. Profit was estimated at Rs 186 crore and net interest income at Rs 820.4 crore for the quarter, according to a poll of analysts conducted by CNBC-TV18.