Motilal Oswal Initiates Coverage on RBL Bank with a Buy Recommendation, Target Price Set at Rs 370

RBL Bank Posts Strong 4QFY26 Results, Maintains Outlook

RBL Bank (RBK) released its fourth-quarter results for the fiscal year 2026, recording a Profit After Tax (PAT) of INR2.3 billion. This represents a significant year-over-year increase of 234% and a 7.4% quarter-over-quarter growth. The bank's Net Interest Income (NII) showed a healthy growth of 7% year-over-year and 0.8% quarter-over-quarter, reaching INR16.7 billion, which aligns with expectations.

However, Net Interest Margins (NIMs) declined by 22 basis points quarter-over-quarter in the fourth quarter, primarily due to lower yields and changes in the loan mix. Despite this, the bank remains optimistic about its NIMs, expecting stability in the first quarter of fiscal year 2027 and improvement from the second quarter onward. Operating expenses grew by 5% year-over-year but fell by 1% quarter-over-quarter, while other income reached INR10.7 billion, staying broadly in line with expectations.

As a result of these factors, the bank's Cost-to-Income (C/I) ratio improved to 65.1%, compared to 66.3% in the previous quarter.

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Earnings Estimates Adjusted

In light of the margin compression and slightly higher credit costs due to ongoing credit card stress, Motilal Oswal has adjusted its earnings estimates for RBL Bank. The research firm has cut its estimates for fiscal year 2027 and 2028 by 14% and 5%, respectively. Based on these revised estimates, the bank is expected to recover its Return on Assets (RoA) to 1.3% by fiscal year 2028.

Recommendation

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Motilal Oswal maintains its 'BUY' rating for RBL Bank with a Target Price of INR370, equivalent to 1.3 times the estimated Average Book Value (ABV) for September 2027.