RBL Bank shares witnessed their steepest single-day decline since June 2024, plummeting over 7% on Monday following the release of disappointing December quarter results. The Mumbai-based private lender's stock performance reflected investor concerns over deteriorating asset quality and missed profit expectations.

Credit Costs Surge Amid Portfolio Challenges

The primary factor driving the share price decline was a significant deterioration in credit costs, which increased by 40 basis points sequentially during the December quarter.

The sharp rise in credit costs stemmed from elevated write-offs in RBL Bank's credit card portfolio, signaling stress in this key business segment.

Profit Performance Falls Short of Expectations

RBL Bank's financial performance during the quarter disappointed analysts and investors, with net profit significantly missing consensus estimates.

The bank's profitability was significantly impacted by elevated provisions, which surged 28% from the previous quarter. Additionally, RBL Bank incurred a one-time expense of ₹32 crore due to new labor law implementations.

Management Outlook and Strategic Concerns

During the earnings call, RBL Bank's management provided cautious guidance regarding the credit card business, highlighting ongoing macro-level challenges. Key management observations included:

• Credit card portfolio facing challenges due to macro factors
• Similar slippage trends expected over the next two quarters
• Cards in force showing sequential growth after 6-7 quarters of decline

This forward-looking commentary contributed to investor apprehension about the bank's near-term asset quality trajectory.

Analyst Perspectives and Market Ratings

CLSA maintained its "hold" rating on RBL Bank with a price target of ₹310, characterizing the December quarter as "average" from a balance sheet perspective. The broader analyst community remains divided on the stock's prospects.

Stock Performance and Trading Activity

RBL Bank shares closed 7% lower at ₹301.95 on Monday, representing the most significant single-day decline in recent months. Despite the current weakness, the stock has delivered substantial returns over the longer term, gaining 91% over the past 12 months, indicating the stock's previous strong momentum before the recent quarterly disappointment.

RBL Bank has announced its strategic initiative to strengthen its provisioning coverage ratio, setting ambitious targets for the upcoming quarter. The bank has outlined a comprehensive plan to enhance its financial resilience through improved provisioning standards.

Strategic Provisioning Targets

The bank has established clear parameters for its provisioning coverage ratio enhancement:

Implementation Timeline

RBL Bank aims to achieve these provisioning targets within the next quarter, demonstrating the bank's commitment to rapid implementation of its risk management strategy. The establishment of a minimum comfort level at 65% provides a baseline threshold while the bank works toward the higher target range.

Financial Strengthening Initiative

This provisioning coverage ratio enhancement represents a significant step in RBL Bank's ongoing efforts to strengthen its financial position. The targeted range of 75% to 78% indicates the bank's focus on maintaining robust coverage against potential loan losses while ensuring adequate buffer for unforeseen circumstances.

The bank's strategic approach involves setting both aspirational targets and minimum thresholds, providing flexibility in execution while maintaining clear performance benchmarks. This dual-target approach allows for measured progress while ensuring minimum standards are consistently met.