RBL Bank sees lower funding costs, faster loan growth after Emirates NBD deal, rating upgrade

RBL Bank expects its capital infusion from Emirates NBD and a recent AAA rating upgrade to reduce funding costs, accelerate loan growth and improve profitability over the next three years, Managing Director & CEO R Subramanian Kumar said.

Kumar said the bank has already begun deploying the capital by retiring high-cost deposits and borrowings. He added that lower borrowing costs, stronger access to corporate lending opportunities and growth in RBL Bank operations are expected to support earnings.

The bank is targeting a return on assets (RoA) of 1.8% to 2% over the next three years.

"We have a very calculated, calibrated plan," Kumar said, adding that the bank had prepared its deployment strategy immediately after announcing the Emirates NBD transaction.

Kumar said borrowing costs, which were earlier around 60-70 basis points above larger banks, have already declined and are expected to narrow further.

"We will be getting around 30-40 bps reduction in my cost of the asset itself," he said, adding that the cost of deposits could decline to around 4.8%-4.9% by the end of the financial year.

Kumar said RBL Bank expects loan growth to remain at 25-30%, driven by GIFT City, mid-corporate lending and stronger participation in high-rated corporate credit. He noted that the bank's improved credit profile has enabled it to access lending opportunities that were previously unavailable.

The bank's current market capitalisation is ₹22,992.99 crore. The stock has gained more than 57% over the last year.

The bank also expects to benefit from the FCNR deposit scheme following its partnership with Emirates NBD

. Kumar said RBL Bank is targeting $1.5 billion to $2 billion of FCNR deposits, supported by access to the Indian diaspora in the UAE through Emirates NBD's network.

Kumar said the bank has not seen signs of stress in its MSME portfolio despite geopolitical uncertainties and higher energy costs.

Kumar also outlined RBL Bank's long-term profitability goals. While he said reaching a 1% RoA is achievable because of the fresh capital, the bank's aspiration is to nearly double that level through better capital deployment and balance sheet expansion.

He said management aims to expand the balance sheet by another ₹2 lakh crore over the next two to three years by deploying the new capital efficiently, while continuing to build its fee income and trade finance businesses.

The current market capitalisation of the bank is around ₹22,992.99 crore.

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