RBL Bank vs DCB Bank: Which bank stock should you buy for long-term? Here’s a 5-point analysis

RBL Bank vs DCB Bank: Leading private lenders RBL Bank and DCB Bank Ltd. have received bullish upgrades on their respective stocks from domestic brokerage firms after investors recently renewed their buying interest in the last few sessions. Private banks also drove benchmark indices Sensex and Nifty 50 during Thursday's session to settle higher despite initial volatility struggles.

The Nifty Bank index settled 0.75 per cent higher at 51,783.25 on June 20 with the Nifty 50 closing at 23,567.00 level, up 51.00 points or 0.22 per cent. The 30-share BSE Sensex ended higher by 141.34 points or 0.18 per cent at 77,478.93 level. The Nifty has logged record closing highs in five out of six sessions, while the Sensex has ended at all-time highs for five consecutive sessions.

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The fear gauge index, the India VIX closed 2.68 per cent lower today. Sector rotation towards large-cap banking stocks will likely continue due to their valuation comfort, keeping the benchmarks buoyant, according to analysts.

"The Bank Nifty Index continued its strong momentum and managed to hold the support at 51,200-51,000. The bullish momentum is likely to continue, and dips should be utilized to buy the index targeting 52,200/52,600. The lower-end support is placed at 51,000, where the highest open interest is built up on the put side. A break below this level will only dampen the bullish sentiment,'' said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

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1.RBL Bank vs DCB Bank: Share Price Trend

On Thursday, shares of RBL Bank opened at ₹268.35 and gained nearly a per cent to hit an intra day high of ₹269.55 against a 52-week high mark of ₹300.50 on the BSE. Shares of RBL Bank settled 0.32 per cent higher at ₹267 apiece on the BSE. In one month, RBL Bank has given 5.9 per cent returns to investors, while the last one year returns have touched 55.33 per cent.

Shares of DCB Bank opened at ₹140.15 and gained 2.74 per cent to hit an intra day high of ₹144 against a 52-week high mark of ₹163.40 on the BSE. Shares of DCB Bank settled 4.25 per cent higher at ₹143.40 apiece on the BSE. In one month, DCB Bank has given 8.78 per cent returns to investors and 20.48 per cent in the last three months. The last one year returns by DCB Bank have touched 21.45 per cent, according to Trendlyne data.
 

2.RBL Bank vs DCB Bank: Technical analysis 

According to domestic brokerage firm Religare Broking, RBL Bank has been in a steady uptrend for over two years demonstrating a resilient structural development. In the process, the stock has neglected its lower top lower bottom formation by surpassing its previous swing high.

RBL Bank has registered a fresh breakout from a symmetric triangle pattern on the weekly charts. ‘’Following the price action and buoyancy in the banking sector we believe bullish tone to continue in the stock,'' said Religare Broking on RBL Bank. The brokerage has maintained a ‘buy’ rating on RBL Bank at a target price of ₹290 in the range of ₹264- ₹268 for a one-month period.

Also Read: RBL Bank Q4 results 2024: Net profit grows 30% YoY, deposits up 22%; declares ₹1.50 per share dividend

DCB Bank has seen a healthy recovery in loan growth after witnessing sluggish trends during FY20-22. The bank's shift in loan mix toward retail loans has not only shielded its margins but also provided stable, profitable growth. 

The bank has made significant investments in the business and is well poised to sustain the healthy growth rate, while improvement in operating leverage helps sustain RoA at one per cent by FY26E compared to 0.9 per cent in FY24. Domestic brokerage firm Motilal Oswal Financial Services estimates RoE to recover toward ~14 per cent by FY26E compared to average 10 per cent over FY22-24.  

Motilal Oswal had downgraded its rating on DCB Bank to ‘neutral’ in July 2019 amid weaker operating performance and an uncertain growth/asset quality outlook. ‘’However, we find the current valuations at 0.7x FY26E ABV attractive in context to a ~21 per cent earnings CAGR estimated over FY24-26E. We, thus, upgrade our rating to ‘BUY’ from Neutral, with a revised target price of ₹175 (0.9x FY26E ABV),'' said Motilal Oswal on DCB Bank.
 

3.RBL Bank vs DCB Bank: Asset Quality

RBL Bank's deposit growth came in at 22 per cent in the January-March quarter of FY24. On the asset quality front, overall slippages increased to 0.56 per cent of the assets from the year-ago period's 0.44 per cent and were driven by microlending and also unsecured loans.

The gross non-performing assets (NPA) ratio improved to 2.65 per cent from 3.37 per cent in the year-ago period. The overall provisions came at ₹414 crore against ₹235 crore in the year-ago period. The overall capital adequacy ratio was 16.18 per cent as of March 31, which included the core tier-I ratio at 14.38 per cent.

DCB Bank reported its best asset quality in four quarters as the gross NPA in the quarter stood at 3.23 per cent from 3.43 per cent in the December quarter, while net NPA fell to 1.11 per cent from 1.22 per cent last quarter.

"Advances growth year-on-year (YoY) was at 19 per cent (YoY mortgages growth 22 per cent, co-lending growth 23 per cent, construction finance growth 26 per cent and agri and inclusive banking growth 30 per cent) and deposit growth YoY was at 20 per cent," DCB Bank said in a release.
 

4.RBL Bank vs DCB Bank: P&L print, NII

RBL Bank reported a 30 per cent rise in the post-tax net profit for the March quarter of FY24 at ₹353 crore, driven by the bank's non-interest income. The Maharahstra-based lender had reported a net profit of ₹271 crore in the year-ago period.

The core net interest income (NII) grew 18 per cent to ₹1,600 crore on a 20 per cent loan growth. However, it was limited by a compression in the net interest margin to 5.45 per cent against 5.62 per cent a year ago. The other income grew 30 per cent to ₹875 crore during the reporting quarter for RBL Bank.

DCB Bank’s net profit rose by nine per cent year-on-year (YoY) to ₹156 crore for the quarter ended March (Q4FY24) also on the back of a modest rise in NII as well as a decline in provisions. The bank's NII during the quarter increased by 4.4 per cent from last year to ₹507.5 crore. The bank’s net interest margin (NIM) shrunk to 3.62 per cent in Q4FY24, from 4.18 per cent in Q4FY23.

5.RBL Bank vs DCB Bank: Corporate Action

RBL Bank declared 15 percent dividend while announcing the Q4 results 2024 on saying, "This is to inform you that the Board of Directors of RBL Bank Ltd at its meeting held today i.e. on April 27, 2024 has, inter-alia considered and approved dividend of Rs. 1.50 per equity share of ₹10/- each fully paid up (i.e. 15 per cent) to be payable subject to the approval of the shareholders of the Bank at the ensuing Annual General Meeting."

While announcing Q4 results, DCB Bank said in its stock exchange filing that the bank's board approved a proposal to raise up to ₹500 crore in capital by issuing equity shares or convertible securities through Qualified Institutions Placement (QIP), subject to shareholder’s nod.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.