RBL Bank Q2 Profit Dips 17% Amid Focus on Asset Quality

Introduction

RBL Bank has reported a mixed set of financial results for the second quarter of fiscal year 2025-26, reflecting a challenging operating environment. The private sector lender saw a year-on-year decline in net profit and revenue, even as it made progress in growing its secured loan book and improving certain asset quality metrics. The bank's performance comes ahead of its board meeting scheduled for January 17, 2026, where it will consider and approve the unaudited results for the third quarter and nine months ended December 31, 2025.

Q2 FY26 Performance Overview

For the quarter ended September 30, 2025, RBL Bank posted a consolidated net profit of ₹192.46 crore, a significant 16.9% decrease from the ₹231.70 crore reported in the same quarter of the previous fiscal year. On a sequential basis, the profit fell by 10.2% from ₹214.22 crore in Q1 FY26. The bank's total income for the quarter stood at ₹4,441.59 crore, a marginal decline of 0.4% year-on-year and 1.6% quarter-on-quarter. This dip in profitability led to a reduction in Earnings Per Share (EPS), which stood at ₹3.11 for Q2 FY26, down from ₹3.77 a year ago.

Operating Metrics and Provisions

The bank's operating metrics reveal a disciplined approach to costs alongside necessary provisioning. Total expenses for Q2 FY26 were ₹3,696.72 crore, a 2.5% decrease from the previous quarter, though they were up 4.5% year-on-year. Provisions and contingencies for the quarter were ₹499.70 crore. While this figure was 13.0% higher than the preceding quarter, it marked a 19.2% reduction compared to the same period last year, indicating a potential stabilization in credit costs.

A Look at Recent Quarterly Trends

Analyzing the bank's performance over the last few quarters provides a clearer picture of its trajectory. In Q1 FY26 (ended June 30, 2025), the bank reported a net profit of ₹200 crore, which was a 46% year-on-year decline. The operating profit for that quarter had also de-grew by 18% YoY to ₹703 crore, primarily attributed to lower unsecured advances and a repo rate cut. In contrast, the Q3 FY25 (ended December 31, 2024) results showed a sharp 86% YoY drop in net profit to just ₹33 crore. This was largely due to a prudent decision to make an additional provision of ₹414 crore on its Joint Liability Group (JLG) portfolio, taking the total provision on that segment to 85%.

Balance Sheet Strength and Asset Quality

RBL Bank has continued to strengthen its balance sheet by focusing on secured assets and granular deposits. As of September 30, 2025, net advances grew 14% year-on-year to ₹1,00,529 crore. The retail to wholesale advances mix stood at 60:40, with the bank emphasizing growth in secured retail segments. Total deposits also saw healthy growth, rising 8% YoY to ₹1,16,667 crore. Asset quality has shown improvement in certain areas. The Gross NPA ratio improved to 2.32% in Q2 FY26 from 2.78% in the previous quarter. The Net NPA ratio stood at 0.57%. The bank maintains a high Provision Coverage Ratio (PCR), including technical write-offs, at 92.74%, providing a substantial buffer against potential credit losses.

Management Commentary and Strategic Direction

Mr. R Subramaniakumar, MD & CEO of RBL Bank, acknowledged the steady financial performance and progress towards strategic goals. He noted, “We remain cautious about the short-term challenges emanating from macro-economic environment affecting certain unsecured lending segments. We continue to demonstrate strong growth in chosen areas of secured retail & commercial banking on asset side and granular deposits on liability side.” The management's commentary underscores a strategic pivot towards building a more resilient and profitable loan book, with initiatives like the 'One Bank' approach aimed at enhancing customer engagement and cross-selling opportunities.

Conclusion

RBL Bank's recent performance highlights a period of transition, marked by pressure on profitability but a clear strategic focus on strengthening its core operations. The growth in secured advances and granular deposits, coupled with a robust provision coverage ratio, positions the bank to navigate ongoing macroeconomic uncertainties. Investors and stakeholders will be closely watching the upcoming Q3 FY26 results, scheduled to be announced on January 17, 2026, for further indications of the bank's performance and strategic execution.