The moment is opened for trading, RBL Bank hit the 10% LC today at Rs.258.25, with over 6.55 lakh shares still waiting to sell. Its 52-week low stands at Rs.241.75.

The poor show for Q2FY20 took a toll on its price – it was falling profit as well as surge in bad loans. Operationally, it did well but its asset quality fall is what is worrisome.

Despite a 46% (YoY) rise in NII at Rs.869 crore, RBL’s net profit plunged 73% to Rs.54 crore. The fall in profit was mainly on account of the provisions it set aside – Rs.533 crore v/s Rs.140 crore (YoY), almost four times more. The need to provide for was on account of a fall in its asset quality, raising fears of a growing bad loan problem. The company did say that it was being very conservative by hiking the provisions and this was just being prudent given the stress in the economy currently.

Its Gross NPA rpse 122 bps to 2.6% while Net NPA rose 91 bps to 1.56% (QoQ).

The Bank expects Rs.1800 crore worth of stress in its loan books of which Rs.800 crore has been recognsied as NPA in current Q2 against which RBL has taken Rs.350 crore as provisions. The 1800 crore NPA is from four groups - east-based group, diversified media group, south-based coffee group and west-based plastics group plus a buffer.

Loans which are due for more than 30 days but less than 60 days and classified as special mention account a (SMA1) constituted 0.45% of the bank’s loan book and loans due for more than 60 days but less than 90 days (SMA 2) were at 0.39% total advances as of September 30.

RBL expects to return to normal earnings trajectory by end of FY20, which means we might see more stress in Q3.