Strong performance across all parameters to continue… RBL Bank Ltd. has emerged as one of the fastest growing private sector banks with a network of 265 branches and 388 ATMs.
Valuation: RBL Bank has continued to witness strong business momentum and we expect this traction to continue for the next few years. We project business to grow at a CAGR of 32% over FY18-20E with gradual rise in profitability at RBL Bank (14.4% of RoE and 1.3% of RoA by FY20E). Besides, the bank is well capitalized with CAR of 15.3% and Tier I ratio of 13.6%. Thus, we don’t expect any further capital dilution for the next two years Overall, higher earnings growth, highly capable management, steady asset quality, improving business mix and above industry average loan growth will help the bank to sustain premium valuations over new generation private sector banks. Hence, we continue to maintain our Accumulate rating on the stock with target price of Rs586 (P/ABV of 3.0x for FY20E).
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