Best Midcap Stock in Banking Sector
In this article, we are going to analyse RBL Bank Ltd Stock. RBL Bank is one of India’s fastest growing private sector banks in last 5 years with an expanding presence across India.
RBL Bank Ltd – Stock Analysis
RBL Bank – Overview
- RBL/Ratnakar Bank Limited is a private sector corporate/wholesale bank, headquartered in the Mumbai.
- RBL Bank was founded in August 1943 as a regional bank in Maharashtra with two branches in Kolhapur and Sangli. It mainly serves small and medium enterprises (SMEs) and business merchants in the Kolhapur-Sangli belt.
- In August 1959, the bank was categorized as a scheduled commercial bank and in 1970, it received a banking license from the Reserve Bank of India (RBI).
- The Bank offers specialized services under six business verticals namely : Corporate & Institutional Banking, Commercial Banking, Branch & Business Banking, Retail Assets, Development Banking and Financial Inclusion, Treasury and Financial Markets Operations.
- RBL Bank Ltd Stock is listed on both NSE and BSE (RBLBANK) on August 31, 2016.
Business Breakup – Advances & Deposits
Growth in BUsiness
In FY2019, RBL has reported a strong growth in the business with the improvement in asset quality.
- Advances & Deposit :
- Advances growth is 35% YoY, while the growth of deposit is 33% YoY.
- The investments of the bank has also grown by 9% in FY2019.
- CASA :
- As far as percentage contribution of CASA (Current Account and Saving Account) in the total deposit of the bank is concerned, it is 25% as on March 31, 2019. While, the CASA contribution is 24.3% and 24.6% in March, 2018 and December, 2018 respectively.
- The growth of CASA in the total deposit of the bank is always considered as a positive sign for the bank. Since it indicates the strategies employed by the management of the bank in order to increase its Retail segment contribution in the overall business.
- NPA :
- Gross as well as Net NPA numbers of the bank are decreasing since March 2018. Gross NPA is reduced to 1.38% in March, 2019 from 1.40% in March,2018.
- The Net NPA numbers are also decreased to 0.69% in March, 2019 from 0.78% in March, 2018. It may be because of the growth of Non-wholesale Advances/Loans (49%) is relatively much greater than the growth of Wholesale loans (25%) disbursed by the bank in FY2019.
- As a result, the % of Net Stressed asset has also come down to 0.73% in March, 2019 from 0.86% in March, 2018.
- Capital Adequacy Ratio (CAR) :
- The only negative sign in the performance of the bank is the percentage of Capital Adequacy Ratio (CAR) has decreased from 15.3% in March, 2018 to 13.5% in March, 2019. Though the % of CAR is greater as per the RBI guidelines, but it is relatively far less than the other banks.
- Thus, the management of the bank must focus on risk management techniques effectively in coming quarters in order to improve its CAR number.
Financial Performance FY2019
- Current Market Capitalization = Rs. 27,250 Cr, Mid Cap Stock
- PE Ratio = 31.23, the company offering almost 39% YoY Net Profit growth FY2019 and with PE ratio 31.23 is one of the best midcap banking stock.
- CAGR of Net Profit and Net Sales for last 5 years is around 56% and 36 % respectively.
- PEG Ratio = 0.55
- Almost all MidCap, Multicap and Large and Mid cap funds have invested and have significant holding for the stock in the portfolios.