Shares of RBL Bank declined 8.5 percent to Rs 382 on Tuesday, making the private sector lender the biggest loser on the BSE 500 and Nifty 500 indices, despite reporting a substantial improvement in profitability for the July to September quarter of FY27. Investors focused on persistent credit cost pressures, slower core retail loan growth and valuation concerns, overshadowing improvements in earnings and net interest margins.

RBL Bank reported a 169 percent year on year increase in standalone net profit to Rs 481.7 crore for the second quarter of FY27. Net interest income (NII) rose 37.4 percent year on year to Rs 2,131 crore, while net interest margin (NIM) expanded to 4.61 percent from 4.13 percent in the preceding quarter. The improvement in margins supported stronger income generation, although concerns remained over the sustainability of the bank's turnaround.

Asset quality indicators improved during the quarter, with the gross non-performing asset ratio declining to 1.02 percent from 1.30 percent in June. However, provisions increased to Rs 766.5 crore from Rs 599.2 crore sequentially, reflecting continued pressure from credit costs. The bank's net advances grew 42 percent year on year, while deposits increased 34 percent, supported partly by foreign currency non-resident (FCNR) inflows under the Reserve Bank of India's special deposit scheme.

Brokerage opinions remained divided following the results. Goldman Sachs maintained its Sell rating with a target price of Rs 310, implying a potential downside of approximately 26 percent from Monday's closing price. The brokerage acknowledged improvements in return on assets and return on equity to 0.9 percent and 4.4 percent, respectively, but highlighted subdued core retail loan growth and weak fee income as concerns. Although it raised its FY28 and FY29 earnings estimates by 11 percent and 12 percent, respectively, stronger FCNR deposit inflows were a key factor behind the revisions. Goldman Sachs cautioned that the turnaround could remain gradual and considered the valuation of approximately 19 times FY28 estimated earnings expensive.

CLSA also maintained an Underperform rating with a target price of Rs 310, noting that the bank's quarterly profit was around 15 percent below its estimates because of higher credit costs. Despite approximately $3.4 billion in FCNR deposit inflows, average current account and savings account (CASA) growth remained muted at 5 percent, while deposit costs continued to be higher than those of peers. CLSA also raised concerns about loan growth being driven by relatively lower-yielding assets. It argued that an expected medium-term return on equity of 8 to 9 percent did not adequately justify the stock's valuation of approximately 1.4 times price to book.

In contrast, Citi retained its Buy rating with a target price of Rs 505, implying an upside of approximately 21 percent from Monday's closing price. The brokerage highlighted a sequential expansion of 48 basis points in NIM to 4.61 percent, which supported NII growth of approximately 37 percent year on year and 29 percent sequentially. Citi acknowledged that credit costs increased to 2.52 percent amid higher provisions and credit card stress, but noted that card slippages moderated to approximately Rs 125 crore to Rs 130 crore in September, compared with Rs 660 crore for the entire quarter. It expects credit card costs to normalise to around 6 percent in the second half of FY27 and forecasts earnings growth exceeding 35 percent in FY27, followed by annual growth of more than 20 percent in FY28 and FY29.

Despite the sharp correction, RBL Bank shares remained up 21.6 percent in 2026 at the time of the report, outperforming the Nifty 50, which had declined 14 percent over the same period. The bank's market capitalisation stood at approximately Rs 59,500 crore.

The contrasting brokerage assessments highlight the key factors investors are monitoring: whether improved margins and earnings can translate into sustainable returns, whether credit costs will moderate, and whether the bank can strengthen its core retail lending and low-cost deposit base. While Citi sees scope for continued earnings growth, Goldman Sachs and CLSA remain cautious about the pace of the turnaround and the valuation investors are paying for it.