Target: ₹375
CMP: ₹296.80
We met the MD & CEO of RBL Bank (RBK), R Subramaniakumar, to understand the progress on the Emirates NBD (ENBD) deal and the growth outlook, particularly in view of the huge capital boost post-deal. He indicated that regulatory approvals are expected by mid-Q4-FY26, after which ENBD could launch an open offer of ₹280/share, followed by preference capital infusion, as indicated earlier.
The bank sees the deal as a game-changer, with boost in networth to about ₹45,000 crore/CET 1 to 39 per cent (depending on ENBD stake purchase/capital raise), which would catapult it into a different orbit vs peers, in terms of assets-liability scale-up (organic/inorganic) and fee opportunity.
The management believes that the better cost of funds due to higher share of equity funding, improved debt rating and access to NRI fund-flow should enable the bank to strategically shift its loan portfolio toward mortgages/corporates, leading to better RoA/RoRWA. Also, RBK is likely to explore inorganic opportunities, to strengthen its liability-asset mix and thus accelerate RoE in the long run.
Near term, we believe the recent rate cut would weigh on margins and thus trim FY26E earnings, while raising earnings for FY27-28E by 8 per cent given the better growth potential. We retain Buy on the stock while raising our TP by 7 per cent to ₹375, now rolling fwd on 1.2x December 27E ABV. We have not factored in the business/RoA surge due to the deal (as it is not yet completed).