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Analyst Meet / AGM
21-Oct-24
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Conference Call
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RBL Bank
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Credit card segment is returning to normalcy and microfinance is moving towards normalizing in Q3FY25
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RBL Bank conducted a concall on 19 October 2024 to discuss the financial results for the quarter ended September 2024 and prospects of the bank. R Subramaniakumar, MD&CEO of the bank addressed the call:
Highlights:
The bank is focused on realization of assets and liabilities. The granular deposits (deposits below Rs 3 crore) have shown a strong 22% growth against the overall deposit growth of 20%. The share of granular deposits increased to 48.5% end September 2024.
The bank has also shown a sharp increase in the disbursements of retail loans from Rs 600 crore per quarter in September 2022 to Rs 2300 crore per quarter in September 2024.
The current account balance growth of 22% is driven by the branch banking and corporate relationships.
The bank is consolidating position in the credit cards business, while the near term growth is on the backburner in the microfinance segment due to on ground issues relating to overleveraging of the customers.
Under its planning for FY2024-FY2026, the bank has planned advances and deposit growth of 18 to 20%, granular deposit share of more than 50%, retail loan book share of 60-65%, operating profit growth more than advances group and RoA of 1.3% by FY2026.
The bank is confident of exceeding its guidance for FY2026.
The bank has recorded strong growth in retail secured advances to Rs 23000 crore end September 2024 from Rs 10000 crore end September 2022.
The bank has reduced credit card business dependence on a single large co-brand partner, with direct sales and other co-brand partners now contributing 64% of the origination.
The credit card stress is mainly on account of the transition of the collection partner. The stress ahead is a function of time and scale of the transition program. The bank is witnessing the collection back to pre-transition level in the early bucket in September 2024. The bank expects card slippages to materially normalize in Q3 and return to complete normalcy in Q4FY25.
The fundamentals of the microfinance business remain robust and the bank has the lowest ticket size. The focus is on renewing and restricting exposure to borrowing having single loans.
As per the bank, the credit card segment is returning to normalcy and microfinance is moving towards normalizing. The bank expects the normalcy to return in the microfinance segment by Q4FY2025.
The share of affordable housing and small business loans has increased to 15% of disbursements. The bank expects them to materially improve in the coming quarters.
NIM at 5.04% in Q2 and H1 FY25 NIM was at 5.35%. The margins were impacted due to lower microfinance disbursements and higher delinquencies in credit card and microfinance business.
The sequential decline in margins is also on account of a bump up of Rs 69 crore in interest income during Q1 on account of income tax refund.
The new slippages of loans was at Rs 817 crore which were entirely contributed by cards at Rs 606 crore and microfinance at Rs 231 crore. The net slippages were negative in the wholesale banking segment.
The restructured loan book of the bank has reduced to 0.38% end September 2024 from 0.44% end June 2024.
The credit cost increased to 80 bps from 59 bps in the previous quarter. The bank has created provisions of Rs 662 crore on account of higher slippages in card and microfinance business.
The collection efficiency in the microfinance agents stood at 97.1% in September 2024. The bank was expecting it to touch 98% in September 2024, but some of the states witnessed decline in collections due to floods such as Bihar which accounts for 30% of the business.
States such as Rajasthan, Punjab and Jharkhand which were problematic have turned around and have shown significant up trend.
The bank continues to hold continent provisions on microfinance business at 1% or Rs 283 crore end September 2024.
The credit card customer base stood at 5.5 million and the bank is looking at adding 12 to 15 lakh customers every year against 20 + lakh acquisition earlier.
Bank expects normal credit cost for the card business to be 5.5% to be achieved in the next two-three quarters.
LCR stands at 129% end September 2024.
The bank expects credit cost at 2.6-3% for FY2025.
The bank is targeting loan growth of 18-20% loan growth for FY25.
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