Q1WithBQ: RBL Bank Q1 Earnings Review
#Q1WithBQ | #RBLBank's June quarter net profit rises 43% year-on-year.
MD & CEO Subramaniakumar R joins in to discuss the Q1 performance. #BQLive
MD & CEO Subramaniakumar R joins in to discuss the Q1 performance. #BQLive
Transcript
00:00 Hello and welcome to BQ Prime. You are joining us on this special broadcast where we are
00:03 discussing RBL Bank's first quarter results for the financial year ending March 2024.
00:08 We are joined with Mr. Subramanian Iqbal, the MD and CEO of RBL Bank. Welcome, sir,
00:13 to this broadcast. I just wanted to start the first question with this 43% rise in net
00:18 profit. What is exactly happening here? Because on the NII side, it is still a modest 21-22%.
00:25 If you look at it, NII is growing at around 15% earlier, which has just gone up around 21%.
00:30 And look at the cost, it's another one. OPEX cost has just grown only by 15%. These are two major
00:35 factors which we narrated earlier also. We will be able to grow the advances. One of the major
00:41 factors which contributed to that is that our retail advances grew by 34% YOY and the total
00:45 overall advances grew by 21% YOY. And the margin with which we operate in this space,
00:52 in the retail especially, has contributed to the higher NII, which helped us to reach this path.
00:58 Okay, that is interesting. I will come to the advances part in a short while,
01:04 but I want to talk about the OPEX that you mentioned that that's gone up only by about 15%.
01:08 How are you controlling the expenditure side of the story? What is the bank doing differently?
01:14 All the investment which are required in our technology and manpower was consumed in last
01:20 two, three quarters. If you're starting from FY22 onwards, that was the investment which is going on.
01:24 And it will continue to be maintained in the same range as we move forward also.
01:28 One of the factors which tilted this cost-income ratios to be reduced is that it is our NII was
01:34 not growing, which has started getting it. So the revenue growth was one of the reasons for
01:37 our cost-income ratio to be moderated, and we will be the same range. But as the expense is
01:43 concerned, yes, we will continue to be in the same barcode figure, which we have been achieving it
01:47 for this quarter. Okay. Coming to the advances stories, so your non-wholesale book, I mean,
01:54 you're terming it as retail, but there's obviously some of the other elements also in it.
01:59 Business loans have not grown at all during the first quarter. So I'm just trying to understand,
02:03 is that a conscious strategy to maybe realign the portfolio a little bit?
02:06 See, if you recall, if I understand your question clearly, you wanted to know that which segment has
02:12 grown in that one. Is that right? Yes. Yes. But also, also on your business loan, specifically
02:17 that portfolio that's not grown. So I see, you have to look at the entire balance sheet, which
02:22 you have been talking about it in two major parts. One is a wholesale bank, which consisting of a
02:26 corporate book as well as a commercial book. We also said that within that particular space,
02:31 we will be growing the commercial book, which is a focus, which gives me a little extra margin.
02:35 That is what we have been targeted. We have said that that will reach around 30-35% of the total
02:40 book by 26. So the remaining part of the additional book, which is consisting of the retail, which will
02:45 be around 60-65% by 26. There, we were not having a multiple products first. So we launched and
02:52 relaunched some of the products like housing loan and mortgage loan and business loan. When I say
02:56 business loan, it comprises of the retail business loan or working capital term loan, which is there
03:01 up to 7.5 crores is what we call it as a business loan. Mortgage loan is you know, the lap is called
03:06 the mortgage loan. And we have a housing loan. See the lap and housing loan, the business loan,
03:12 which is a part of that grew around 158%. And this will continue to grow. And this will be the one of
03:17 the engine which is contributing for the growth of the retail. Plus, additionally, we are already
03:22 growing in our microfinance as well as another credit card will continue to grow. These two
03:27 quarters would have seen that the contribution of microfinance has been phenomenal. They were
03:31 able to increase it by 2100 crores. They are contributing to the tune of around 700 crores
03:36 per month, which will continue to be done in the same range. And one of the another two,
03:42 three areas where we will grow in next three quarters will be two wheeler, gold loan,
03:46 used car four wheeler. These are the areas where we will be growing. So we will be able to maintain
03:51 the momentum of the credit growth in retail and overall credit growth, the same range what we
03:56 have been limiting. I want to touch on the mortgage portfolio. So, you know, by and large,
04:03 people are expecting that this is the peak of the interest rate cycle. If that is the underlying
04:08 assumption, then expectation will be that eventually over the next few months, you will see
04:12 some amount of downward revision on interest rate as well. Or at least that's a possibility. I'm
04:17 just curious to understand why still your mortgage lenders are lining up to banks because this will
04:22 probably be the peak of the interest rate cycle, they're probably paying the highest amount of
04:27 interest rate on their loans. Why are they tying up on home loans now versus say, maybe six months
04:31 down the line when things might look slightly different? See, the point is, it is about the
04:34 availability of the space in the market. If you look at the space, there are certain cities where
04:38 the people have realized that instead of getting onto the rented accommodation to own the accommodation.
04:43 So if you look at it, the houses which are in the range of 1 crore to 1.5 crores in the market like
04:47 Mumbai is a heartache. Whereas in upmarket is another one where the people are moving away
04:52 from the two bedroom to three bedroom, three bedroom to their own villas. This is another
04:57 moment which is taking place. These are the two things which is attracting a lot of housing loan
05:01 thing. So the people who are there one bedroom affordability has increased. And the people who
05:07 wanted to improve, they all feel that this is the right time for doing it. When the things are going
05:12 better, the good time that people try to build their assets. That's one of the major reasons
05:18 for housing loan to be demand. The second is that in respect to the mortgage loan,
05:23 if you look at it, the businesses are just spreading beyond what they have been doing it
05:27 earlier. One of the reason for them to scale their business is to get a loan out of their assets,
05:32 which they are having a much easier, much better. So the lap loan, if you look at it, it is easier
05:36 to get an easier to deploy and easier to grow. So that is the reason that the businesses are
05:40 growing beyond the boundaries today. If you look at that, there are so many urbanization is taking
05:46 place in the country. This is one reason that the urbanization always have a demand for these
05:50 two products on a continuous basis. Apart from that, your business loans. That's the reason
05:55 that is triggering it. Okay, I want to touch on the liabilities front now. As far as CASA ratio
06:01 goes, you've not really seen that much. I mean, in fact, your CASA ratio has been improving
06:06 consistently. I'm curious to understand how in a market where larger lenders are very aggressively
06:13 targeting the CASA ratio. And in fact, even within those banks, people are moving from
06:19 CASA to FDs, because your return is better on those deposits. How is Arbel Bank managing this
06:26 37.3? See, the first thing you have to understand that our market share is around 0.5%. So that is
06:33 not going to tilt much as far as that the movement beyond the market is that we are a small player,
06:38 and we will be in a position to get our own piece of the cake. So that is one part of it.
06:42 The second important part is that the people are moving from savings to FD is given because this is
06:48 the right time where the people have that they want to lock up their FD at the peak rate. Whereas
06:52 we are in a position to offer the rate which is extremely competitive in the market and we are
06:57 approaching this segment of the market. So if you look at it, the deposit less than 2 crores is the
07:03 one where we are focusing which I have been telling it to the market for around almost last one year,
07:08 that we are looking for the granular. If I look at that particular growth, that is more than 20
07:12 plus growth, which we have been consistently seeing it. And if you look at that the LCR
07:16 deposit of the bank is somewhere around 42.7%, which is high. So by focusing on the larger base
07:23 of the customers who are in a position to earn, who are looking for the interest around 6 to 7%,
07:29 which we are able to differentiate from other banks, that's one of the major reason for us to
07:34 opening more customers and expanding our basis in the branches helped us to retain this particular
07:39 position. Okay, so fair enough. I want to touch the last couple of questions around asset quality.
07:44 Now, of course, your gross NPA ratio has improved significantly even on a sequential basis.
07:50 I want to understand in terms of future outlook, what is it that you are looking at in terms of
07:56 the asset qualities, is downward trend going to continue? Or are you expecting that probably
08:02 stabilizes around the 3%? See, we have been consistently showing this drop of our GNNPA,
08:08 and we will continue to show that we will improve that number of 3.22. As we move forward, it will
08:13 still come down. If you look at it, some of these areas where we have been able to contain the
08:17 slippage, which will continue, which we are pretty strong about it, because our credit monitoring and
08:21 credit underwriting models have gone sea change. With the complete analytics background, we are
08:28 confident of maintaining this downward trend of GNNPA. And it is already 1%. And we are pretty
08:33 sure that it will as we move forward, it will also drop beyond 1% range. Okay, and going ahead,
08:40 is there any need for further capital because your growth plans seem to be still going pretty strong?
08:46 Yeah, we have a good cushion there. You can see that we are approximately around 17%. It is to
08:51 be precise, somewhere around 16.68% is my CRA and around 15.05% is what the CE2 won. There is no
09:00 hurry for us to get into the market for equity. We do not intend to get into the market for
09:04 raising the capital. All right. Thank you so much, Mr. Romankumar for joining us in this conversation.
09:08 Thank you. Thank you.