RBL Bank Share Price Soars 7%: Uncovering the Key Factors Behind the 80% Q4 Net Profit Drop!

RBL Bank’s share price experienced a surprising surge on Monday, despite reporting an over 80% drop in its consolidated net profit for the fourth quarter of FY25. The stock opened positively, climbing 7% to reach a peak of ₹201.25 per share during the early trading session. Analysts had expected a decline, but RBL Bank’s results were largely in line with projections, primarily due to a boost in non-interest income, tempered by high credit costs.

RBL Bank’s Q4FY25 Financial Performance

In its latest earnings report, RBL Bank declared a standalone net profit of ₹68.7 crore for Q4FY25, a significant decline from ₹353 crore in the same quarter last year. This reflects an 80.5% year-on-year (YoY) decrease, primarily driven by increased credit costs, which rose to 3.4% compared to 2.0% in Q4FY24. However, a sequential comparison shows improvement, as the profit rose from ₹33 crore reported in the previous quarter.

Key Highlights from the Report

Net Interest Income (NII): Reported at ₹1,560 crore, down 2.5% YoY but aligned with analyst estimates.
Pre-Provision Operating Profit (PPoP): Came in at ₹880 crore, slightly lower than the previous year but showing a 1.3% increase sequentially.
Asset Quality Improvements: Gross slippages saw a decline of 130 basis points, and the bank’s Provision Coverage Ratio (PCR) improved to 89%, a 700 basis point increase quarter-on-quarter.

Outlook for FY26

RBL Bank’s management has expressed optimism regarding future growth, suggesting that the most challenging phase of credit costs is behind them. They expect 16-18% loan growth in FY26, driven by a 25-30% expansion in secured retail assets and a 10-12% increase in wholesale lending.

Brokerages Respond Positively

Following the earnings release, various brokerages adjusted their target prices for RBL Bank. Motilal Oswal raised its EPS estimates by 12% for FY26 and FY27, reflecting confidence in business momentum and an expected normalization of slippages by the second quarter of FY26. They upgraded RBL Bank’s rating from Neutral to Buy, setting a target price of ₹220, based on a 0.8x FY27 estimated Adjusted Book Value (ABV).

Market Reaction and Future Expectations

Investor sentiment towards RBL Bank remains cautiously optimistic, with analysts noting:

Improved Operational Efficiency: Early signs of stabilization in asset quality, particularly in the unsecured portfolio.
Risk-Reward Profile: With a compelling valuation at 0.65x FY27E P/ABV, RBL Bank presents an attractive investment opportunity.
Potential for Continued Growth: As the MFI cycle shows signs of turning, the bank is poised for stronger business momentum in the latter half of FY26.

In conclusion, while RBL Bank faces challenges regarding credit costs, its recent performance and strategic outlook suggest a path toward recovery and growth. Investors and analysts alike are keeping a close eye on the bank’s ability to capitalize on these opportunities in the coming quarters.