RBL Bank conducted a concall on 19 January 2024 to discuss the financial results for the quarter ended December 2023 and prospects of the bank. R Subramaniakumar, MD&CEO of the bank addressed the call:

Highlights:

The operating performance of the bank is in line with the guidance in Q3FY2024. The advances increased 20% yoy and 5% qoq to Rs 79949 crore end December 2023.

Advances and deposits have experienced robust growth with granularity of both sides of Balance Sheet catching pace.

The retail segment continues to grow faster with the focus on granularity. The deposits have surged 23% yoy and 5% qoq.

ROA and ROE expansion is on track and the profitability is healthy.

Retail advances grew at faster pace by 33% yoy and 5% qoq to Rs 46371 crore. The retail:wholesale mix was 58:42 end December 2023.

Retail disbursements was Rs 5958 crore for Q3FY24, of which Rs 2631 crore was towards new secured retail products.

The wholesale loan book has increased 6% yoy and 4% qoq end December 2023.

The disbursements in the microfinance segment was steady sequentially at Rs 1989 crore as the bank has decided to go slow due to election in some states. The bank sees normalcy returning in the microfinance loan book in Q4FY2024.

The bank has issued 5.75 lakhs new credit cards in Q3FY2024. The bank is looking at diversifying its sourcing channel for cards. The bank has reduced the share credit card sourcing externally to 65% and expects to further reduce it to 50% going forward

Total deposits grew 13% yoy and 3% qoq to Rs 92746 crore. CASA Ratio at 33.8% end December 2023.

Deposits less than 2 crore grew 23% yoy to Rs 41275 crore with its share rising to 44.5% of total deposits. The bank aims to further raise the share of deposits below Rs 2 crore to 50% in next couple of quarters.

Average LCR for the quarter was 132% end December 2023.

Gross NPA ratio was steady at 3.12% and Net NPA ratio was 0.80% end December 2023.

Provision Coverage Ratio including Technical Write-off was 89.3% end December 2023.

As per RBI directions dated 19 December 2023, the bank has created contingent provision of Rs 115 crore on AIF investments.

AIF investments were primarily into venture debt fund made over years for building inroads into new digital age businesses. The Bank has been working with these debt funds for 10 years and it has not witnessed any challenges in realizing its principle.

The investments are in the money and the bank does not see any concern.

Excluding this contingent provision, net Profit grew 53% yoy and 9% qoq to Rs 319 crore as against the reported net profit rising 12% yoy to Rs 233 crore in Q3FY2024.

Excluding this contingent provision, ROA was 1.03% against reported ROA of 0.75% for Q3FY24.

The bank has raised the retail direct sourcing locations to 185 locations from 68 locations earlier. The bank plans to add another 51 locations in next 2 quarters.

The bank has expanded its presence to 12 states from 9 states last year.

The net restructured loan book of the bank has declined to 0.63% from 0.89% a quarter ago.

Net interest margin was marginally lower at 5.52% on account of slow disbursement in the microfinance segment.

The cost of funds as increased 10 bps in Q3FY2024. The bank expects to maintain stable margins in Q4FY2024.

The operating expenses increased on account of higher business volumes and team expansion.

Overall Capital Adequacy was 16.4% with CET 1 was 14.6% end December 2023.

The bank had impact of 57 bps on CET 1 and 65 bps on overall capital adequacy ratio due to the regulatory changes on higher risk weights.