Buy, Sell, Or Hold? RBL Bank shares fall 9% after Q2; Bulls cite strong growth, bears question valuations

Shares of RBL Bank fell close to 9% on Tuesday, October 13, after three brokerages downgraded the stock, citing concerns about valuations and the sustainability of its earnings recovery.

The bank's Q2FY27 net profit nearly tripled to ₹481.7 crore from ₹179 crore a year earlier. Net interest income (NII) grew 37.4% year on year to ₹2,131 crore. At the same time, asset quality improved, with gross non-performing assets (GNPA) declining to 1.02% from 1.3% in the previous quarter and net non-performing assets (NNPA) falling to 0.29% from 0.37%.

However, provisions increased to ₹766.5 crore from ₹499.7 crore a year earlier, potentially weighing on the earnings outlook.

The downgrades by Axis Capital, ICICI Securities and Investec come amid sharply divided views on the lender's outlook. While Citi and IIFL remain bullish on its earnings recovery, CLSA and Goldman Sachs have maintained bearish calls, arguing that the turnaround is largely priced in.

The division within analysts also comes with a wide divergence in price targets for RBL Bank. Citi's bullish call comes with a price target of ₹505, indicating an upside potential of 21%, while both bearish recommendations from CLSA and Goldman Sachs have a price target of ₹310 each, indicating a downside potential of 26% from where the stock closed on Monday.

Bullish view: Citi, IIFL see earnings recovery

Citi maintained its "Buy" rating on RBL Bank with a target price of ₹505, implying an upside of around 21% from Monday's close.

The brokerage highlighted a 48-basis-point expansion in net interest margin (NIM), strong operating profit and improving stress in the credit card portfolio. It expects loan growth to exceed 35% in FY27 and remain above 20% in FY28 and FY29.

Also read: HCLTech shares jump 5% on EPS upgrades after Q2 results, boosts other IT stocks as well

IIFL also maintained a "Buy" rating, with a target price of ₹475, implying an upside of around 13.7%. The brokerage expects earnings to grow at a compounded annual growth rate (CAGR) of 30% between FY26 and FY29. It also sees return on assets (ROA) improving to 1.5% from the fourth quarter of FY27.

Bearish view: CLSA, Goldman flag valuation concerns

CLSA maintained its "Underperform" rating on RBL Bank with a target price of ₹310, implying a downside of around 26% from Monday's close.

The brokerage said the bank's profit after tax (PAT) missed estimates by 15%, primarily due to higher credit costs. It also argued that a medium-term return on equity (ROE) of 8–9% does not justify the stock's valuation.

Goldman Sachs retained its "Sell" rating and target price of ₹310. The brokerage noted that although reported profit grew 2.7 times year on year, earnings per share (EPS) rose by only 7%, pointing to a more limited improvement in per-share earnings. It also believes the capital infusion has boosted reported profitability and that much of the turnaround is already reflected in the stock's valuation.

Three brokerages downgrade RBL Bank

Axis Capital downgraded RBL Bank to "Reduce" from "Add" and set a target price of ₹400, implying a downside of around 4% from Monday's close.

ICICI Securities downgraded the stock to "Add" from "Buy", while raising its target price to ₹460. The revised target implies an upside of around 10%.

Investec downgraded RBL Bank to "Hold" from "Buy," retaining its target price of ₹440, which represents an upside of around 5% from Monday's close.

The three rating changes come against a backdrop of contrasting assessments of the bank's earnings trajectory and valuation.

Majority Analysts Still Say Buy RBL Bank

26 analysts have coverage on RBL Bank, of which 18 have a "buy" rating, five say "hold", and eight have a "sell" recommendation. The consensus estimate of price targets implies an average return potential upside of 5% from current levels.

Shares of RBL Bank fell as much as 8.7% to an intraday low of ₹381.4 on Tuesday. The stock is now trading 7.5% lower on Tuesday at ₹386.6. The stock is still up 22% so far this year.