RBL Bank: Well capitalized

Private sector lender RBL Bank has taken a proactive step, in an extremely volatile markets that saw banking sector stocks taking on their chin.

The YES Bank episode has sent shockwave down the most crucial segment in the economy, which grappling between rising bad loans, on the one hand, amid falling interest rates scenarios, and a weak depositor confidence, on the other hand.

In order to calm investor nerves, RBL Bank maintained its guidance for FY20 and went on to term media reports of any material adverse change in its asset quality after it announced its Q3 results on January 22 as untrue.

RBL said it has a capital adequacy ratio of 16.08% with Tier I at 15.02%, which is significantly higher than the prescribed regulatory requirement of 11.5% and 9.5%, respectively.

The management re-emphasized itself as fundamentally strong institution.

Rumours around financial health and stability of the institution especially on social media seem to be misplaced, motivated and not based on facts.

RBL Bank Bank has also said its Liquidity Coverage Ratio (LCR) stands at 145% of statutory requirements as at the end of last week.

RBL Bank shares rallied nearly 10% following the clarification. It was last quoting at Rs 227.50 per share up Rs 19.30.

The Management has guided for the remaining stress to be recognized in the coming quarter before earnings begin to normalize from FY21E.

However, the sluggish economic environment and RBL Banks exposure to BBB/BB & below pool remains a concern.

Strong growth in the retail business was led by cards/MFI and the robust margins however does provide some cushion to its operating performance going ahead

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