The shares of RBL Bank Ltd on Friday fell 13.7% after the management warned of risks to its corporate loan book for the next two quarters. This despite the bank reporting a 41% rise in net profit for the quarter ended June.
Announcing its first quarter results, the bank’s management said gross non-performing assets (NPAs) may increase even as the bank has made sufficient provisions.
“Challenges of the recent past, starting with the leverage position of certain promoters, tight credit availability, volatility in equity markets, is impacting the risk and liquidity position of a few of our clients. We expect this to play out during the rest of the financial year. Based on these estimates, we believe that we could incur additional 35-40 basis points of credit cost. We also expect gross NPA to rise to 2.25-2.5%,” said Vishwavir Ahuja, managing director and chief executive, RBL Bank, in a statement.
RBL reported a 41% rise in net profit to ₹267.05 crore for the June quarter against ₹190.04 crore a year ago. Profit was higher than the ₹262 crore estimated by a Bloomberg poll of 12 analysts.
Net interest income, or the difference between interest earned on loans and paid on deposits, increased 47.9% year-on-year to ₹817.32 crore in April-June. Other income, which includes core fee income, rose 47.6% to ₹481.21 crore during the quarter. Net interest margin was 4.31% in Q1FY20 compared with 4.04% a year ago.
The bank’s asset quality, however, remained stable as gross NPAs as a percentage of total advances stood at 1.38% in the June quarter against 1.4% in the year-ago period.
Provisions rose 51.9% to ₹213.18 crore.
In January-March, it had set aside ₹199.97 crore as provisions. Post-provision, net NPA ratio 0.65%, against 0.69% in the March quarter, and 0.75% in the year-ago period.
Shares of RBL Bank lost 13.71% to close at ₹500.35 apiece, while the benchmark index, Sensex, lost 1.44% to close at 38,337.01 points.
