RBL Bank Ltd (RBLBANK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to RBL Bank Limited's Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. R Subramaniakumar, Managing Director and CEO of RBL Bank. Thank you, and over to you, Mr. Kumar.
R Subramaniakumar (RBL Bank Ltd): Thank you, Michelle. Good evening, ladies and gentlemen. And thank you for joining us for a discussion on our bank's financial results for the second quarter of the financial year 2027. We have uploaded the results along with the presentation on our website, and I am sure you have had a chance to go through that in detail ahead of this call. I am joined by Executive Director, Mr. Jaideep, and the CFO, Mr. Bhavin, and other members of our management team to address any questions you may have. Before we get into the details on the Q2 operational performance, I would like to briefly touch upon the macro trends. The Indian economy continues to demonstrate resilient, supported by the robust domestic demand, healthy services activity, improving manufacturing momentum, well supported by the government policies and sustained investment. The GDP growth expectations for FY '27 have been revised upwards to around 7.1%, reflecting the strength of underlying economic activity. High-frequency indicators remain encouraging, while credit growth continues to be robust across the banking system, providing a supportive backdrop for the banking sector. However, the global macroeconomic environment has become increasingly challenging in recent months with heightened geopolit-
R Subramaniakumar (RBL Bank Ltd): elevated crude oil prices, tighter global financial conditions, and higher interest rates contributing to greater volatility across currency, bond and capital markets. Inflation risks are likely to remain elevated over the coming quarters driven by energy, freight and food related pressures. In response, Reserve Bank of India has raised the repo rate by 25 basis points to 5.5% and shifted its policy stance to calibrated tightening, signaling a continued focus on containing inflationary pressures. It has also undertaken measures to manage currency volatility, including interventions in the spot and forward foreign exchange market and the introduction of a special window to meet daily dollar requirements. Market expectations point to the possibility of further rate increases, while the system liquidity is expected to gradually normalize as surplus liquidity is absorbed. Elevated crude oil prices, weather related risks and external uncertainties will therefore remain key monitorables. Notwithstanding these challenges, India's strong economic fundamentals, the fiscal discipline and a sustained domestic demand provide a solid foundation for medium term growth. Fiscal pressures are modest and government's efforts towards fiscal consolidation are paying off when several developed economies are on the other side. Despite rising inflation, the fact that it is rising from a low level and likely to remain within the upper tolerance band of Reserve Bank of India is comforting. The system-wide banking asset quality is robust and therefore remain constructive on the outlook for the banking sector. With resilient economic activity and a healthy credit demand expected to support its growth trajectory, the bilateral and multilateral trade and investment agreements is a lever to navigate external imbalances while domestic consumption and demographics will shift gear towards higher growth. In a scenario wherein higher interest rates, evolving liquidity conditions and increased market volatility warrant continued vigilance, we believe that the overall medium-term operating environment within India remains favorable and offers meaningful potential for growth. In this backdrop, I will briefly touch upon our trends in the quarter. As you are aware, we have generated large amount of liquidity on our balance sheet between the capital raise and the deposit raise during the FCNR(B) scheme. For context, between both, we have added 35% of our balance sheet as of 31st May 2026. This liquidity is deployed as follows: First, prepaid or chosen not to renew the borrowings and bulk term deposits, which were at a higher cost. Grow our business across both wholesale and secured retail, where we have seen demand and the business conditions continue to remain fairly stable. The wholesale lending is a highly rated corporates where we want to start or deepen the relationship. The balance liquidity is tactically deployed in a combination of the short-term investments and the short-term loans given to our wholesale customers. Given the large liquidity still on the balance sheet, we expect to continue this for the next few months. Over the medium term, we expect this liquidity to be fully deployed in the wholesale banking segment where we want to use both our ability to underwrite larger exposures and the liquidity to strengthen the relationship with the better-rated corporates. And the secured retail through the branch banking route, again, to deepen the customer relationship. At the same time, while corporate deposits and borrowings have already seen reduction in the cost, we will continue to focus on building granular retail deposits and rationalized our deposit rates gradually. As you may have seen, we have already started on this journey across our savings and term deposits. We will continue our investments in upgrading our distribution across branches, people and technology to deepen our network and improve the quality of our products and services. On to asset quality trends in retail. The collection momentum, including the rural businesses, this quarter has been
R Subramaniakumar (RBL Bank Ltd): with no disruptions so far. However, given deficient monsoons in certain districts, we continue to remain very watchful. We have also not seen any material impact on our portfolio arising from the conflict in the Middle East so far. In our unsecured retail business, we are seeing JLG return to normalcy for a few months now, with the bucket x efficiency consistently close to 99.5%. We remain confident in the journey of credit cards and have seen the last quarter in line with the path laid out few quarters ago. We are encouraged with asset quality trends and we expect slippages to trend materially downwards in line with our guidance in the last quarter. On to business trends in the quarter. We continue to see robust growth across both sides of the balance sheet. Our credit rating upgrades have helped us add customers, especially in the wholesale, for both advances and deposits. Our advances grew this quarter by 42% year-on-year to 1,42,314 crore and average advances grew 33% year-on-year. This includes leverage we provided to the customers of 10,300 crore for FCNR deposits and the liquidity deployment in a better rated wholesale client where we are looking to deepen and start our relationship. Similarly, our deposits grew 34% year-on-year to 1,56,272 crore in the quarter. Average deposits grew 24% YOY. This includes the FCNR deposit raised by this quarter. As a result, our average CASA ratio stood at 24% as of 30th September. It would have been 28.1% ex FCNR deposits. Some of the milestones achieved in the quarter. One, the balance sheet crossed 2 lakh crore to end the quarter at 2,22,344 crores, more than doubling over from financial year 2022. The term deposits crossed 1 lakh crore to 1,13,746 crore. Operating profit crossed 1,000 crore mark to 1,296 crore for Q2 FY27. Cost to income ratio for the quarter was 56.5% versus 70.7% in Q2 FY26. In summary, as we look ahead, our growth priorities are focused on building a scalable, resilient, and profitable franchise. Our normal business trends are improving quarter-on-quarter as unsecured stress normalizes. At the same time, we are working on putting together building blocks which we will articulate in greater detail over the coming months, but briefly would focus on: Deepening and starting new relationships with large corporates, which were not accessible earlier, either due to constraint of credit rating, capital position, or our cost of funds. We're also working to target the trade flows in the corridors where ENBD is present, where we believe we have a competitive advantages because of the ENBD network. Continuing to build granular and stable liabilities with the objective of progressively narrowing the cost of deposit gap vis-a-vis the larger banks. At the same time, we want to leverage the momentum from the FCNR deposit relationship we have on-boarded to target non-resident flows starting with the Middle East and over the time in all the geographies where ENBD has a presence. MNC and in sectors like IT and IT services, the relationship relationships are being strengthened, especially on the liability and non-funded side due to the group's cross-border strength and the bank's strong credit rating. We will invest in the distribution infrastructure, be it branches, people, and technology, to strengthen our presence in the relevant geographies. We will also take early steps on investing in a wealth proposition for our customers. I invite Mr. Bhavin to take you through the specifics of our results.
Bhavin (RBL Bank Ltd): Thank you, Mr. Prakash. Briefly touching on some of the specific aspects of our financial performance. Our advances grew 42% year-on-year to 1,42,314 crore in the quarter. Average advances grew 33% year-on-year. Whole wholesale advances grew 56% year-on-year, retail grew 32% year-on-year.
Bhavin (RBL Bank Ltd): Wholesale, the corporate segment grew 60% year-on-year, and commercial banking segment grew 47% year-on-year. While in the retail segment, secured retail assets grew 52% year-on-year, and unsecured retail advances Secured retail advances include the FCNR leverage we have provided to customer of approximately 10,300 crores. The retail wholesale mix was therefore at 56-44. Our total deposits grew 34% year-on-year to 1,56,272 crores. This was helped by the FCNR deposit. Excluding the FCNR deposit, the growth was 6% year-on-year as we look to optimize the cost of deposit as mentioned earlier. Average deposit grew 24% year-on-year. Our CASA grew 14% year-on-year to 42,526. Average LCR for the quarter was at 148%. Now, on our operating performance, our NII was up 37% year-on-year and 29% sequentially to 2,131 crores. Our NIM for the quarter was at 4.61%, an increase of 48 basis points sequentially. Non-interest income grew 16% year-on-year and 12% sequentially to 1,077 crores. This was also helped by foreign exchange income from the FCNR deposits. Fee income grew 12% year-on-year and 13% sequentially to 1,040 crores. Our net total income grew 29% year-on-year and 23% sequentially to 3,208 crores. Our opex grew 3% year-on-year and 7% sequentially to 1,812 crores. The credit cost for the quarter was at 771 crores or 63 basis points, which included standard asset provisioning of 11%. The specific credit cost was lower at 52 basis points versus 62 basis points of last quarter or 641 crores vis-a-vis a 670 crore for the last quarter. Our net profit for the quarter was up 170% year-on-year and 90% sequentially to 482 crores. On asset quality, GNPA was down 28 basis points sequentially to 1.02% and Net NPA was down 8 basis points sequentially to 0.29%. PCR stand at 71.5%. Our Capital Adequacy Ratio was at 30.1 and CET 1 ratio was at 29%. With this, we will open the session for question and answer.
Moderator: Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions may please press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and one to ask questions. The first question is from the line of Rikin Shah from IIFL Capital. Please go ahead.
Rikin Shah (IIFL Capital): Hi. Good evening everyone and congratulations on very strong FCNR mobilization in this quarter. I had seven questions. The first one, if we look at the period and CASA growth, it's up almost 15% Q-o-Q, but the average CASA growth is flat. So, could you just elaborate on progress on various initiatives to strengthen the retail deposit accretion, including branches, etc.? I do notice that the employee headcount has been rising, but any progress on strengthening the retail franchise, that's my first question.
R Subramaniakumar (RBL Bank Ltd): Yeah Rikin, as far as the CASA today, what you're seeing it down is a conscious decision of let go some of the high cost because you saw that we have reduced our CASA rate considerably. Whenever the rate of interest is reduced in the CASA, there will always be a downward dip and it just catches up. You would have seen it in two quarters before we reduced the rate and around 1,400 crores we lost. And our team could mobilize the same amount within a period of four to five months' time. So, the recouping is in a little time. So, even if suppose any correction takes place there will be some exit and those exits will be corrected with the revised rate of interest. Number one. Number two, the strategies are very simple. We have expanding our branches and densifying the respective branches. That means the number of people whose productivity has reached the desired level, more number of people are being added in the respective branches. That's why you saw the people addition. And second, what is being done is that we have, we are just expanding in the with wide number of branches. We will be adding approximately 30 to 50 branches in a quarter. This quarter, branches are proposed to be opened in next two weeks' time. We had to open it today, but further crowded program of board and other things, we couldn't do it today. Another time around 38 branches are getting opened in couple of weeks' time. So, the branch expansion is on, on track and now we are going to have a differentiated approach, which is going to be a unique for us, in the sense that we are entering into the affluent, which is said almost three, four quarters before that
R Subramaniakumar (RBL Bank Ltd): wealth business now with the ENBD's partnership. We are pretty confident of expanding this growth. And our segment growth you would have seen it, it is growing fairly well and it is providing us a lot of confidence because of the various propositions which has been introduced into this particular segment with proper execution. And if you see it, our retail term deposit continues to be growing at a very healthy rate. Last two quarters it did around 21, 22%. This time, again, it grew around 16%. That will again continue to grow and support our the deposit growth and other things, I mean our, our advance deployment.
Jaideep (RBL Bank Ltd): Yeah. We are also building our NRI proposition and the journey is well to capture the entire UAE corridor which will help us to build the liabilities business.
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