RBL Bank shares jump 21% in one month: What's driving the rally?

RBL Bank has seen an impressive rally in its share price over the past month, rising approximately 21% on the NSE. The mid-sized private sector lender, which was once under investor scrutiny due to asset quality concerns and leadership transitions, has seen renewed optimism driven by strong quarterly performance, improved credit growth, and increased institutional interest. The sharp upside has prompted investors to re-evaluate the bank’s fundamentals and growth prospects.

Strong Q4FY24 Results Bolster Sentiment

The key catalyst behind the share price surge has been RBL Bank’s robust Q4FY24 results, reported in late April. The bank posted a net profit of ₹352 crore, a 30% year-on-year growth, supported by higher net interest income (NII), lower provisions, and improved asset quality.

• NII rose 10% YoY to ₹1,412 crore.

• Net Interest Margin (NIM) improved marginally to 4.91%.

• Gross non-performing assets (GNPA) stood at 3.12%, down from 3.37% in Q3FY24.

• Provision coverage ratio (PCR) was strong at 76.4%.

"The bank has shown commendable control over credit costs, while maintaining healthy NIMs. We expect earnings momentum to continue over FY25," said Nirav Karkera, Head of Research at Fisdom.

Credit Growth and Retail Focus Paying Off

Another key driver of investor confidence has been the sustained improvement in loan book growth, especially in retail and microfinance segments. RBL Bank’s total advances grew 18% YoY in Q4, driven by strong traction in credit cards, microfinance, and personal loans.

According to the management, the retail-asset-led strategy is now stabilizing, and disbursements have picked up sharply after COVID-related disruptions.

"RBL Bank has now transitioned from a corporate-heavy book to a more diversified retail-focused model. This change is beginning to reflect in both earnings and investor sentiment," noted Ashutosh Mishra, Head of Research at Ashika Stock Broking.

Brokerage Upgrades and Target Revisions

Several brokerages have upgraded RBL Bank’s rating and revised their target prices upward after the quarterly earnings.

• Motilal Oswal has maintained a ‘Buy’ rating with a target of ₹330, implying a further 15% upside.

• HDFC Securities noted that "valuation remains attractive given the improving return ratios," setting a target of ₹310.

• Axis Securities upgraded the stock to ‘Buy’ from ‘Hold’, citing improving asset quality and higher fee income potential.

Currently, the stock is trading around ₹285, up from ₹235 a month ago.

Institutional Buying and Technical Indicators

The rally is also being supported by strong institutional flows, particularly from domestic mutual funds and a few foreign portfolio investors (FPIs), who have increased their exposure during Q1FY25.

Technical analysts also point to bullish signals. The stock has crossed its 200-day moving average, indicating strong momentum. Relative Strength Index (RSI) remains elevated but not overbought, suggesting room for further upside.

"Price action confirms a breakout above key resistance levels. Unless there is broader market volatility, the stock may attempt ₹300 levels in the near term," said Rajesh Palviya, Head – Technical Research, Axis Securities.

Management Commentary and Strategic Roadmap

During its earnings call, CEO R Subramaniakumar emphasized the bank’s long-term strategy focusing on:

• Expanding the retail lending portfolio

• Improving digital capabilities for better customer acquisition

• Containing credit costs to below 1.2% in FY25

• Enhancing return on assets (RoA) to above 1% over the next 12–18 months

The management also ruled out any immediate fundraising but remained open to capital infusion if growth opportunities accelerate.

Investor Outlook: Optimism with Caution

Despite the rally, analysts advise measured optimism. While the fundamentals are improving, risks remain:

• Macroeconomic volatility could affect retail collections.

• Rising interest rates could pressure NIMs in the medium term.

• Competition in the unsecured lending space is intensifying.

That said, RBL Bank is now seen as a turnaround story rather than a high-risk bet.

"At current valuations (~1x FY25E book), the risk-reward looks favorable. If the bank maintains its trajectory on asset quality and loan growth, there’s scope for further re-rating," said Devang Mehta, Senior Analyst at Centrum Broking.

RBL Bank's recent 21% rally is backed by genuine improvements in operational performance, increased investor interest, and a clear strategic direction. While short-term corrections can’t be ruled out, the medium-term outlook for the bank appears increasingly promising. Investors will be closely watching the next few quarters to see if the lender can sustain this momentum and convert potential into performance.