RBL Bank Q3 FY25: Operating profit jumps 30%, net profit slides

RBL Bank Limited, one of India‘s leading private sector financial institutions, announced its unaudited financial results for the third quarter and nine months ending December 31, 2024. Despite ongoing macroeconomic pressures, the bank demonstrated strong operational performance, driven by its focus on secured retail lending and granular deposits.

How did RBL Bank perform in Q3 FY25?

For the quarter ending December 2024, RBL Bank achieved notable growth in key financial metrics. Net Interest Income (NII) rose 3% year-on-year (YoY) to ₹1,585 crore, underpinned by a Net Interest Margin (NIM) of 4.90%. Meanwhile, the bank’s other income surged by 38% YoY to ₹1,073 crore, bolstered by a 19% increase in core fee income, which reached ₹871 crore.

The quarter also saw a 30% YoY rise in operating profit, reaching ₹997 crore. This growth was tempered by a sharp decline in net profit, which fell to ₹33 crore due to additional provisions of ₹414 crore on gross non-performing assets (GNPAs) within the Joint Liability Group (JLG) portfolio. This provision raised NPA coverage in the segment to 85%, reflecting a cautious approach to risk management.

What are RBL Bank’s business growth highlights?

The bank showcased robust growth in advances and deposits. Net advances increased by 13% YoY to ₹90,412 crore, driven by a 19% growth in retail advances, which reached ₹55,199 crore. Secured retail lending segments, such as housing loans and rural vehicle finance, recorded impressive growth of 33% and 30% YoY, respectively.

RBL Bank also reported a 15% YoY rise in total deposits to ₹106,753 crore. Notably, granular deposits (below ₹3 crore) grew by 20% YoY, accounting for 50.3% of the total deposit base. This emphasis on smaller, stable deposits has strengthened the bank’s liability profile.

The Current Account and Savings Account (CASA) ratio stood at 32.8%, reflecting stable contribution from low-cost deposits despite marginal sequential fluctuations.

How is RBL Bank maintaining asset quality and liquidity?

RBL Bank’s asset quality metrics continued to improve. Gross NPA declined by 20 basis points (bps) YoY to 2.92%, while Net NPA improved by 26 bps to 0.53%. The overall Provision Coverage Ratio (PCR), including technical write-offs, reached an impressive 93.46%.

The bank remains well-capitalized, with a total capital adequacy ratio of 15.4% as of December 31, 2024. This includes a Common Equity Tier 1 (CET1) ratio of 13.7%, providing sufficient buffer for future growth. Additionally, the Liquidity Coverage Ratio (LCR) averaged 143% during the quarter, underscoring its robust liquidity position.

What is RBL Bank’s strategy for long-term growth?

RBL Bank’s strategic focus on secured retail lending and granular deposit mobilization is a cornerstone of its growth plan. The retail-to-wholesale advances mix, now at 61:39, highlights its pivot towards low-risk, high-growth lending segments.

The bank continues to expand its distribution network, which now includes 558 branches, 1,453 business correspondent branches, and 411 ATMs across India. RBL Bank’s wholly-owned subsidiary, RBL Finserve Limited, plays a critical role in extending its reach to underserved markets through 1,145 business correspondent branches.

Expert insights: How does RBL Bank navigate challenges?

RBL Bank’s Managing Director and CEO, R Subramaniakumar, acknowledged the macroeconomic headwinds affecting specific unsecured lending segments. However, he emphasized the bank’s disciplined growth approach, focusing on secured retail and commercial banking while building a stable deposit base.

“We are committed to maintaining robust operational performance and delivering sustainable growth. Our customer-centric approach and strategic focus on profitability continue to drive progress,” he stated during the earnings announcement.

What does the future hold for RBL Bank?

RBL Bank’s performance in Q3 FY25 underscores its resilience in a challenging environment. While near-term profitability has been affected by higher provisions, the bank’s focus on asset quality, secured lending, and granular deposits positions it well for sustained growth.

With an expanding branch network and a strong capital base, RBL Bank is poised to capitalize on opportunities in retail and commercial banking while mitigating risks in unsecured lending segments.