RBL Bank Share Price Rises 5% To 52-Week High After $3.4 Billion FCNR-B Deposit Inflow
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RBL Bank shares surged up to 5% to a fresh 52-week high after the lender disclosed $3.4 billion in FCNR-B deposit mobilisation via the UAE corridor with promoter Emirates NBD, with a research house flagging earnings upside but near-term NIM pressure of 40-45 basis points.
RBL Bank shares rose nearly 5% in Thursday's trade after the private sector lender said it had mobilised $3.4 billion through Foreign Currency Non-Resident (FCNR-B) deposits under the Reserve Bank of India's special forex swap facility.
The stock rose as much as 5% to hit a 52-week high of Rs 409 on the NSE. At 11:21 am, RBL Bank shares were trading at Rs 408.70, up 4.96%.
RBL Bank disclosed on Wednesday that it had mobilised $3.4 billion in FCNR(B) deposits as of August 31, the closing date of the RBI's special swap facility. The bank also said loans provided by its international banking unit against these deposits stood at $1.08 billion.
The deposit mobilisation was supported by RBL Bank's promoter Emirates NBD and its subsidiaries and affiliates, using the strong banking corridor between the UAE and India.
Why Is RBL Bank Share Price Rising Today?
The stock gained after the bank reported a large inflow of FCNR(B) deposits under the RBI's special USD-INR swap facility.
The RBI launched the facility on June 8 to support foreign exchange liquidity and attract foreign currency into the banking system. It covered FCNR(B) deposits, Overseas Foreign Currency Borrowings and External Commercial Borrowings.
The facility received a strong response from overseas depositors, leading the RBI to advance its closing date by a month.
Across the banking system, FCNR(B) deposits stood at $127.226 billion as of August 31, according to provisional RBI data. Total inflows under the facility were $136.377 billion.
What Does $3.4 Billion FCNR-B Deposit Mean For RBL Bank?
The amount raised by RBL Bank is large compared with its existing deposit base.
Citi said the $3.4 billion FCNR(B) mobilisation is equal to around 26% of RBL Bank's total deposits and about 37% of its term deposits. The bank's share of total FCNR(B) mobilisation was around 2.7%, compared with its overall deposit share of more than 0.5%.
FCNR(B) deposits are foreign currency-denominated fixed deposits. The principal and interest are paid back in the same foreign currency.
For RBL Bank, the deposits provide access to additional funds. The lender has already used part of them for lending through its international banking unit, with loans against the deposits standing at $1.08 billion.
The remaining funds can be deployed into loans and other assets, which could help the bank increase interest income.
Citi Sees Higher NII, PPOP
Citi expects the large FCNR(B) mobilisation to have a positive impact on RBL Bank's earnings.
The brokerage estimates that the additional deposits could increase the bank's absolute net interest income (NII) by around 7% in FY27. It also expects pre-provision operating profit (PPOP) to rise by around 10%.
However, Citi expects pressure on RBL Bank's net interest margin (NIM) in the near term.
The brokerage estimates that NIM could come under pressure of around 40-45 basis points over the next two quarters. Some of the impact could be seen in the September quarter, while the full impact may be visible in the December quarter.
The pressure is mainly because the bank has to pay interest on the new deposits, while the funds may take time to be fully deployed.
Citi expects some of this pressure to be offset by the NIM benefit from RBL Bank's Rs 26,000 crore equity infusion.
What Should RBL Bank Investors Watch?
The key factor for RBL Bank will be the pace at which it deploys the additional deposits.
If the bank converts the funds into loans at healthy yields, the deposits could support NII and operating profit. If deployment is slower, the cost of maintaining the deposits could weigh on margins.
The bank's NIM movement over the next two quarters will therefore be important to track, along with loan growth and the use of the additional funds.
RBL Bank Share Price Today
RBL Bank shares touched a 52-week high of Rs 409 on Thursday. At 11:21 am, the stock was trading at Rs 408.70 on the NSE, up 4.96%.
The stock has gained as the market weighs the potential earnings benefit from the lender's $3.4 billion FCNR(B) deposit mobilisation against the near-term pressure on margins.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto has spent 8+ years decoding India's markets, businesses, and consumer economy, reporting for ET Prime and Times Internet along the way, covering the stories behind the numbers.
A Mumbai native and perpetual planner of the next holiday, she stays far, far away from the eternal question, “Where are we going next?” When she's not chasing headlines, she's chasing new cultures, open roads, and a bit of quiet in nature.
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