RBL Bank Ltd Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rikin Shah - IIFL Securities Limited - Analyst : Thank you. Yeah. So thank you for the opportunity. I have a few questions, sir. Firstly, congratulations on the steady execution of the strategy that you have been outlining for a while. Firstly, I would want to understand in FY25, given the further execution on the parameters that you have outlined, any tangible metrics, financial metrics, wherein we could see some further improvement from the current levels, if you could guide on that? That's number one. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call Number two, just a clarificatory question. The employee expense in this quarter seems to have gone down and you haven't reversed the AIF-related provision. So if you could talk about both of them as well. Thirdly, it's on credit card. So we have been talking about entering into more co-branded partnerships, but that has been articulated for some time now, but we haven't seen any announcements and the regulator now doesn't require a pre-approval from them, right? So if you could just talk through what has been the reason for delay in these new partnerships? And the fourth and the last question is on the capital. So with the ROEs of still less than 10% and loan growth almost 2x of that, are we consuming capital? So with the current level of CET1 ratio, do you see a need to raise capital in the foreseeable future? Yeah. Those are my questions.

Question: Rikin Shah - IIFL Securities Limited - Analyst : Just one clarification on employee expense. My question was pertaining to the quantum of employee expense declining sequentially. So was --

Question: Rikin Shah - IIFL Securities Limited - Analyst : Sure. And would you be able to quantify the quantum of reversal and whether 4Q is a more normalized base that we see growing in line with the business in the coming quarters?

Question: Rikin Shah - IIFL Securities Limited - Analyst : Got it. And lastly.

Question: Rikin Shah - IIFL Securities Limited - Analyst : Okay. That answers all my questions. Thank you for answering them, and all the best.

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Yeah, hi. Good afternoon, sir. I just wanted to understand for FY25, as per our guidance and you're talking about PPOP growth leading loan growth. So clearly in '24, NIM's expansion has supported that. So for '25, what are the drivers are we looking at in terms of the PPOP growth leading loan growth and also in ROA expansion? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call Second, in terms of the presentation mentioned that we are venturing into commercial cards, so just wanted to understand your thought process there. Why are you venturing with this? Because as I understand, this has a lower profitability than the retail cards.

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Yeah. Hi, sir. Good afternoon, and thanks for taking up my questions. So firstly, if I look at the MFI book, delinquencies have been higher versus last quarter, be it the early bucket, be it the 90-plus. So if you could just throw some light there?

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Sure. But just to put things together, so when I look at industry, the deterioration is not significant or it's very limited versus -- related to yours. So what's different in your case that resulted in such higher delinquency?

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Got it. That's useful. Thank you. And secondly, on the slippages front again, if we -- because the loan mix has been changing a lot, where do you expect the normalized slippages to settle at?

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Got it. And also, just going back to this loan mix change and both increase in a lot of secured retail assets as well as within corporate into Commercial Banking and everything. So assuming a steady state interest rate environment, what would be the yield trajectory in your case? Could it come down given the increasing share of secured retail? Or would it sort of be maintained at current level?

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Okay. So for example, in affordable HL, what would be the average yield for you?

Question: Mona Khetan - Dolat Capital Market Pvt. Ltd. - Analyst : Got it. Thank you. That's very useful. I'll come back to the queue, and all the best. Thank you.

Question: Ashwani Agarwalla - Edelweiss Asset Management Limited - Analyst : Good afternoon, everyone. A couple of questions. So first question is if I try to work on each of the overall bank and with each of various segments, so some of that really doesn't work out because if you look at a credit card and MFI put together, it's 30% of the book where the yield is anyway for the MFI segment would be anywhere between 20% to 25%, and for the credit card may be slightly higher. So considering that yields there would be roughly 7%, 7.5% and this year, rupee yield is roughly 13%. And even for the last year, the numbers don't stack up in terms of yield. So can you just give yields in various segment-wise?

Question: Ashwani Agarwalla - Edelweiss Asset Management Limited - Analyst : Okay. So if you look at the overall ROA as well, we would be touching 1.2% in the next two years, and currently, we are in the 1% range. Which other segments which are a big drag on the ROA? As we said that credit card has been good for us, MFI is doing good for us. And -- but again, as I said, if we compare ourselves with our peers, which are the segments which is really a drag on the ROE?

Question: Ashwani Agarwalla - Edelweiss Asset Management Limited - Analyst : That's all from my side. Thanks a lot.

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Yeah. Hi. Good afternoon, sir. Congratulations on the great numbers. Sir, a few questions. First is, I think OpEx, you mentioned that this year, the OpEx growth could be lower than loan growth. If I look at FY24, we had an OpEx growth of around 29%, 30%. And assuming you delivered a loan growth of 20%, are you saying that the OpEx growth will come down from 30% YoY to less than 20%? Is that the understanding? Because you still seem to be in investment mode. So that was the question number one.

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Okay. Okay. And because of this reclassification, maybe I have to redo my numbers. Okay. So that is good. But sir, even if you are in investment mode, you are saying that 10%, 15% OpEx growth will be sufficient. Is that what you're seeing?

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Right. Okay. Secondly, sir, on deposits, right, so there is a huge CA growth, which I understand there would be some seasonality. But anything apart from seasonal -- your usual fourth quarter seasonality because even on YoY basis, the growth is very strong in CA. Is there anything which is changing or which has changed for this bank? Or was there any one-off opportunity seasonality?

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Understood. Understood. Because the question was also related to LDR, right? Because such a huge CA growth, at least for us calculating LDR, that has improved very significantly by around 500 basis points. So would that be helpful in -- because your CD ratio or your LDR is now 81% versus 85%, 86% that you were running in the last two, three quarters. Do you have, I mean, scope for improvement in the LDR in whatever is the current condition now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Understood.

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : All right. Understood. And a question on your provisioning and contingent provision, right? So I think as per presentation, we had INR282 crores of outstanding contingent provision as of March '24. There would be some provision release from AIS provisions also, right? I mean, is that included in that INR282 crores? Or what is holding you back and releasing the AIS provisions now classifying into contingent because I think the circular is now done and the rooms are out, there is nothing left there.

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Okay. No, because a few other banks, they have already reversed, right? Because the circular now specify that these are the provisions you need to maintain and these are the provisions you can release. So if there is some quantum that we believe this provision is no longer required, we -- if we don't want to reverse that, we could have at least put that into contingent. But we have not done, right? That is --

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Okay. Okay. Okay. Understood. And last thing is if you can update on the status. Last quarter, we had somehow hinted that there is some corrective actions that we are taking on the -- so that the renewal with the co-branded tie up continues. If there is anything -- if you can comment there on our journey towards that -- progress towards that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Jai Mundhra - ICICI Securities Ltd. - Analyst : Understood. That is all from me. Thank you, and all the best.

Question: Manish Shukla - Axis Capital Limited - Analyst : Yeah. Good evening, and thank you for the opportunity. First question, going back to deposits. For the quarter, if we see QoQ, there is a reasonably decent fall in share of retail LCR as well as less than INR2 crores deposits, right, up to 300 basis points. And there's a big buildup in LCR on a

Question: Manish Shukla - Axis Capital Limited - Analyst : But Jaideep, if you look at the last four quarters, Q1 to Q4, quarter-on-quarter swing in LCR has been about 10 percentage point every quarter. That's a very large swing, isn't it? 129, 142, 132, 140, last four quarters. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Manish Shukla - Axis Capital Limited - Analyst : Okay. Moving on to cards. The new card acquisitions in Q4 is lowest in almost seven quarters. And for the last four quarters, every quarter, it has gone down. Anything that you are changing in terms of your acquisition strategy there?

Question: Manish Shukla - Axis Capital Limited - Analyst : So -- but there is nothing in the quality of the card portfolio which is making it go slow in terms of asset quality? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Manish Shukla - Axis Capital Limited - Analyst : Okay. The other number which you had indicated in the past is that by December this year, you would like Bajaj to go down to 50%. You're already there as of March. Now, would you like to revisit that number of December?

Question: Manish Shukla - Axis Capital Limited - Analyst : Okay. Last question. Mr. Kumar, in your opening remarks, you've talked about operating efficiencies. How long before we go down to less than 60% in terms of cost to income?

Question: Manish Shukla - Axis Capital Limited - Analyst : All right. Thank you. Those are all my questions.

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Good afternoon, everyone. Thanks for the opportunity. So only one question pending from my side. Yields on retail book are flattish quarter on quarter and down vis a vis, second quarter. So anything to read into it, how we should see that going ahead at 17.3%?

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : So this should be the range going ahead, right? There is no further improvement in near term, at least, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Okay. So related to that, how is the composition book in terms of a fixed EBLR linked? Can you just give that?

Question: Kunal Shah - Citigroup Inc. - Analyst : Yeah. Hi. So firstly, on write offs, any change in the policy, seems to be very aggressive write offs. And I think on account of debt, even on the credit cost side, it's even existing for the provisioning, contingency provisioning. It still seems to be upwards of 190 basis points odd, yeah?

Question: Kunal Shah - Citigroup Inc. - Analyst : Okay. But if I broadly understand maybe what you also indicated in terms of the guidance that the credit cost will broadly be near 2% range, so is it like maybe compared to 1.5% to 2%, which we have been highlighting this quarter also, it has settled slightly higher? And maybe, it might not get towards closer to 1.5%, but remain nearer 2% range even in the 10-year term or medium term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Kunal Shah - Citigroup Inc. - Analyst : Okay. So credit cost in 2%, means, as you said, should be now within this range. Maybe earlier, we were indicating that we will see some levers on the margin side as well, but I think, again, in the commentary, you said like it should be in the current range. So the overall ROA improvement lever will broadly be operating efficiency and OpEx to asset.

Question: Kunal Shah - Citigroup Inc. - Analyst : Okay. Got it. And just one clarification. You said AI provisions according to you could not be released based on the conservative interpretation. So there would be downstream investments as well. So that's the reason we have not written it back.

Question: Kunal Shah - Citigroup Inc. - Analyst : Yeah, yeah.

Question: Kunal Shah - Citigroup Inc. - Analyst : Sure. And one last question on MFI. So still in terms of the sequential traction in MFI that seems to be going quite well, almost like 10% odd despite maybe we are seeing some disruption in the few states and we are getting into the election period, okay, wherein there could be some impact on the collection efficiency. So would we continue maybe -- was it more like a Q4 phenomena? Or we continue to build out MFI and the other unsecured products and that will again be the contributor to the overall growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Just two questions. One is on the wholesale book, what's the magnitude of the total write off now left? So that's one. And the second is essentially on your core fee, it's up about 24%. So given -- would you expect this momentum to sustain in the next two years, given the shift in retail and your expectation of 20% advances growth? So these are the two ones. Thank you.

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Yeah. So I just want to know what is the magnitude of the total return of book? And if you can tell us what the wholesale component of that is.

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Something like that, yeah.

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Yes. Yes. Technical account, yeah.

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Right now, it's INR1,000 crores.

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Okay. So your recovery momentum into next two years. Okay, fine.

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Yeah, correct. Exactly. So your wholesale will not -- will be slightly inching up. I mean that it will be 50-50. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Yeah. Okay. Thank you.

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : Yes. So thank you for the opportunity, and congratulations for a great set of numbers. So my first question is related to credit card. So two points over here. So basically, can you talk about how the credit cards basically stress is panning out across system and for the bank as such? Number one. Number two, is that you talked about the partnerships where basically you are entering the new partnerships versus the Bajaj. So how does the ROI metrics for these new partnership was for this, say, Bajaj? So whether we'll have a better ROI in our book in these partnerships versus what we had with Bajaj?

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : So basically, can you talk about the credit card space that we are seeing across systems? Probably we saw card percentage -- also being higher for SBI cards. So how the stat is shaping up into the credit card portfolio for the industry and for the bank?

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : But is there any reason why we're seeing different sales behavior?

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : Sure. Yeah. And Bikram, if you can highlight about like the partnership that we had with Bajaj? I think we had end-to-end partnership, right, from sourcing to collections, everything, right? Now the partnerships that we are entering, obviously, we do not have no collection as part of that partnership. So in that case, the cost have been incurring and obviously, it will be lower as compared to what we used to incur in the Bajaj partnership. Is that right?

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : Great, sir. Sir, secondly, the tax bonanza that we had in FY24. Is there more to it like in FY25, we should expect something more from them?

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : That will give you a leeway to basically build up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 27, 2024 / 8:00AM, RATB.NS - Q4 2024 RBL Bank Ltd Earnings Call

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : Sir, if you can talk about the attrition rate in the bank, like what was it last year and how much it is for FY24?

Question: Anand Dama - Emkay Global Financial Services Ltd. - Analyst : Okay. Great to hear that. Thanks for all the answer.

Question: Nitin Aggarwal - Motilal Oswal Financial Services Ltd. - Analyst : Yeah. Hi, sir. Congratulations on a strong performance. I have two quick questions. One is on the fee growth again because the run rate is very, very strong. And if I look at the composition, especially the distribution fee, that has grown like nearly 200% YoY. So if you can share some colors to what has driven this? And how do you look at this run rate going forward?

Question: Nitin Aggarwal - Motilal Oswal Financial Services Ltd. - Analyst : Okay. Sure. And second is on the more qualitative question, knowing how critical the card business is for us. And over the past two years, we have made significant investments across all our business lines. So any qualitative color if you can share on how we are placed in respect to RBI's IT audits and overall compliance in the recent years?

Question: Nitin Aggarwal - Motilal Oswal Financial Services Ltd. - Analyst : Great, sir. Thank you so much, and wish you all the best.