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    Morgan Stanley slashes RBL target in 11 days after raising it; stock tanks 7%

    Synopsis

    RBL Bank had rallied nearly 80 per cent since its listing on August 31, 2016.

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    The sharp cut of nearly 33 per cent in the target price by Morgan Stanley within 11 days has surprised the investor community.

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    Shares of RBL Bank plunged 7 per cent on Monday, its biggest single-day fall since its listing more than two years ago, after Morgan Stanley downgraded its investment rating to underweight citing expensive valuations.

    RBL Bank had rallied nearly 80 per cent since its listing on August 31, 2016, compared with the 23 per cent rise in the BSE Bankex during the same period. The stock ended atRs 469.60 on Monday, its lowest closing in seven months.

    While downgrading the investment ratings on RBL Bank, Morgan Stanley said that the valuation at 2.8 times FY 19 estimated book with, 13 per cent FY20 estimated RoE, is not cheap and has much lower upside relative to large banks.

    “In the near term, we expect increase in funding cost to be much higher than expected – this will weigh on margins and even growth outlook and as a result, we lower earnings estimates materially,” said a Morgan Stanley note.

    RBL Bank snip 1

    The sharp cut of nearly 33 per cent in the target price by Morgan Stanley within 11 days has surprised the investor community. Morgan Stanley, on October 10, had increased its target price from Rs 500 to Rs 675 when the stock was trading at Rs 599.

    As rates move up, potential improvement in profitability could be delayed, affecting growth and the ability to raise capital at premium valuations, according to the investment bank.

    “The bank is taking higher risk with increased lending to unsecured segments, which needs to be monitored,” said the note.
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    3 Comments on this Story

    cruz696 days ago
    Please speak to the staff most of them don’t know what their job is . It’s all about kissing the back side of the bosses . Over all a poor bank
    Niveza Equity Research697 days ago
    RBL bank has come up with good quarterly results. The leading bank has reported Net profit of Rs. 204.54 Cr vs Rs. 150.62 Cr YoY for Jul Sep 18 quarter. RBL exhibits good yield on advances at 11.33% along with a satisfactory ROE of 11.61%, both on the basis of the banks five years performance. The bank reports high growth in quarterly sales along with enhanced ROE. The bank has performed well in last quarter also. The stock is expected to boost in line with some factors such as aggressive management and fastest growth in the private banking sector. Its NIM has been expanded to 3.04% in FY18 from 2.56% in FY17 along with a significant enhancement in the ROA Search Google for Niveza FREE Share Market Tips today.
    Robin Pandey697 days ago
    Slowly slowly analysts are also saying what street had been saying since last month..In a high interst rate regime, everything will go down..Revenue, profit, share price..everything..
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