Pain in RBL Bank stock eases, but regaining health a challenge


Shares of RBL Bank Ltd pared some of Wednesday’s losses in early trade on Thursday after buying was seen at lower levels. Currently, the stock is trading at ?324.20, up more than 3% on the NSE.

The stock took a beating on Wednesday, declining 12%, following speculation of insider trading. However, the bank clarified that market transactions employees was a “routine activity” with regular exercise of ESOPs (employee stock ownership plans) and sale of equity shares thereafter.

According to some analysts, while there is investor interest in the stock at these levels, shares of the bank are unlikely to regain their lost charm anytime soon. It should be noted that the RBL Bank stock hit a 52-week high of ?716.40 on the NSE in May this year. But its fall from glory was swift with the stock tanking to a 52-week low of ?286.10 on Wednesday.

The cut got steeper after the bank’s management recently indicated that its asset quality could be under pressure in the coming quarters. In the June quarter, RBL Bank reported a 41% jump in net profit against the year ago, aided by a healthy 48% growth in core income. Although its gross bad loan ratio for the June quarter was steady, slippages increased. What also soured investors’ sentiment towards the stock was the lender’s exposure to Coffee Day Enterprise, whose founder V.G. Siddhartha recently passed away.

Post June-quarter earnings, a slew of brokerages expressed concerns on the bank’s exposure to few stressed corporate accounts. Worried over higher slippages and consequent provisions, some of them reduced their earnings estimates for fiscal years 2020 and 2021.

Emkay Global Financial Services Ltd expects the stock to remain under pressure until the bank recognises its corporate stress pool and resumes its otherwise high return on assets trajectory, brokerage house said in a report published on 27 August.

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