RBL Bank shares rally 7%, Rs 220 next? The worst is over, say stock analysts

RBL Bank shares surged 7 per cent to top the Rs 200 level in Monday's trade, as stock analysts believe the worst might be over for the private lender in terms of asset quality and return on assets (RoAs).  This is even as RBL Bank's Q4 profit before tax (PBT) came in 4 per cent below the consensus estimates due to misses on net interest income (NII) and provisions. The bank recorded a weak loan growth of 10 per cent YoY due to de-growth in unsecured loans, but analysts expect a recovery ahead.

On Monday, the stock climbed 7.16 per cent to hit a high of Rs 201.25. With this, the stock has gained 28.70 per cent in the past three weeks. ICICI Securities said the bank's return on asset (RoA), though muted in Q4, has likely bottomed out. It said slippages have eased and are moving towards normalisation. It said the RBL Bank has prudently upfronted the provisions with overall provision coverage ratio (PCR) rising to 89 per cent, within which, MFI PCR is 100 per cent. 

"We estimate 13 per cent loan growth for FY26E with flattish PPOP and RoA rising to 0.85 bps. The bank could deliver 1 per cent RoA in exit FY26E, driving stock re-rating. However, the sustainability of over 1 per cent RoA appears to be contingent on multiple factors," ICICI Securities said while suggesting a target of Rs 210 on the stock. 

MOFSL has upped its EPS estimates for RBL Bank by 12 per cent each for FY26/FY27, as business growth is gaining traction and slippages are expected to normalise by Q2FY26. 

"We also estimate the C/I ratio to improve to 61 per cent by FY27. We estimate FY26E RoA/RoE at 1.2 per cent/12.8 per cent. We upgrade RBL Bank from Neutral to Buy with a target of Rs 220 (premised on 0.8x FY27E ABV)," MOFSL said.

IIFL Securities said the worst of asset quality stress is likely behind the RBL Bank, but felt the path to 1 per cent ROA is still long drawn and is achievable only in FY27. The brokerage expects loan growth to pick-up from 2HFY26 onwards. 

With the average FY27-28E return on equity (ROE) of 11.5 per cent, IIFL Securities estimated that it would take a while for the stock to move towards 1 time price to book value. This brokerage suggested a target price of Rs 220 on the stock. "Reported NIM was flat QoQ, and we expect it to contract in 1HFY26, albeit lower than frontline banks due to higher share of fixed rate loans and cuts in the SA rate (down 80bps)," IIFL Securities said. 

With CET 1 at 14.1 per cent after the recent relaxation by the RBI on MFI risk-weights, RBL Bank may not raise capital in a hurry, said Emkay Global. This brokerage retained its 'Buy' on the stock and with a target price of Rs 225, valuing the bank at 0.8 time FY27E ABV. "Further re-rating will be contingent on better visibility on its planned transformation toward the retail cum SME bank delivering sustained RoA/RoE of over 1 per cent/10 per cent," Emkay Global said.