Buy This Banking Stock For Promising Returns In 1 Year, Brokerage Firm Recommends

Brokerage firm Nirmal Bang recommended buying the stocks of RBL Bank, after the bank's stocks fell to a 52-week low range on December 27. RBL's MD Mr. Vishwavir Ahuja is on immediate leave, and the appointment of Mr. Yogesh Dayal as additional director by the RBI triggered investors' concerns and the share price of the bank started to sink immediately.

Target Price

The Current Market Price (CMP) of RBL Bank is Rs. 173. The brokerage firm, ICICI Direct Recommends has estimated a Target Price for the stock at Rs. 191. Hence the stock is expected to give a 10% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 173
Target Price	Rs. 191
1 Year returns	10.00%

Company performance

RBL's Net interest income stood at Rs. 37,876 mn in FY 21, while it is expected to grow to Rs. 40,746 mn in FY 22. PAT stood at Rs. 5,078 mn in FY 21, while it is expected to grow at Rs. 1,821 mn in FY 22. The firm said, "The issues peaked out in 2QFY22 and should improve from here on. The bank has maintained that it expects net NPAs to be <2% by 4QFY22. 4QFY22 is likely to be a normalized quarter. The bank also does not expect any material divergence in terms of asset quality classification. 2HFY22 credit cost will be 50-60% of 1HFY22." Additionally, the bank is now carrying Rs. 130-150 bn of surplus liquidity.

Comments by Nirmal Bang

According to Nirmal Bang, "In case of RBL, the management has assured that 2QFY22 was likely the peak of NPAs and 2HFY22 credit cost is expected to be lower than 1HFY22. Although there is no change in the bank's financial and business outlook, the answers with respect to reasons for Mr. Vishwavir Ahuja's immediate leave and appointment of the RBI director were answered unsatisfactorily. The fresh instability at the top management level could be of concern in the near term and would be negative for the stock price."

About the company

RBL Bank is a private sector bank with an expanding presence across the country, that currently services over 9.83 million customers through a network of 435 branches; 1,422 business correspondent branches (of which 271 banking outlets), and 380 ATMs spread across 28 Indian states and Union Territories. On December 27, till last traded, the bank's share price fell to Rs. 141.6/share, showing a bearish trend.

Disclaimer

The above stock was picked from the brokerage report of Nirmal Bang. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: RBL Bank's Share Price Bearish At 52-Week Low, Investors' Concerns)