RBL Bank shares surge 11% today. Should you buy, hold or sell?

Shares of RBL Bank climbed 11 per cent in Thursday's trade after two days of back-to-back fall. The private lender has see nearly seven-fold jump in September quarter profits. While a few price targets on the  stock suggests up to 16 potential upside, analysts believe there are no fresh triggers for the stock.

Following RBL Bank’s Q2 results, ICICI Securities increased its price target on the stock to Rs 125 from Rs 106, but downgraded the stock to 'Hold' from 'Add'. September was another stable quarter for the bank but it lacked visible triggers for return on asset (RoA) surprise, ICICI Securities said.

On Thursday, the scrip rallied 11 per cent to hit a high of Rs 137.70 on BSE.

Analysts said loan growth momentum picked up for RBL Bank (12 per cent YoY), but the growth in deposits was muted at 5 per cent YoY.

"Deposit mobilisation was muted and is likely to increasingly become challenging, given the tight liquidity environment and the bank’s weak deposit franchise. We believe this will demand sustained investments in distribution, driving elevated medium-term opex ratios. We lower our FY23E/FY24E earnings forecasts by 6 per cent to factor in higher opex," said HDFC Institutional Equities.

This brokerage has maintained its 'Reduce' rating on the stock with a target of Rs 113, valuing RBL Bank at 0.5 times September 24 adjusted book value.

The mid-sized lender reported a profit of Rs 202 crore for the September against Rs 31 crore in the year-ago quarter, led by a sharp drop in provisions.

For Motilal Oswal Securities, there was a steady improvement in headline asset quality, along with a lower restructured book.  "But net NPA ratio saw a moderate increase, accompanied by a lower PCR. OPEX remains elevated as the bank continues to invest in newer areas of business and branch expansion," Motilal Oswal said. This brokerage has a target of Rs 160 on the stock.

Emkay Global also has a target of Rs 160 on the stock.

"We believe the new MD's strategy on prioritizing management stability, accelerating profitable growth, and NPA recoveries is comforting. The bank's regulatory compliance should also improve and, thus, reduce the risk of regulatory friction. With improving growth/RoE visibility, we upgrade our target to Rs 160 from Rs 125 earlier,” it said.

The target suggests a potential 16 per cent upside.

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