Stocks don’t just rise or fall in the market based on the growth numbers. It is based on whether the actual performance of the company is better than expectations or worse than expectations. For the quarter ended June, RBL Bank reported a 41% growth net profits and a 35% growth in the loan book, which is an extremely healthy growth rate in the banking industry. The net interest income (NII) for the quarter was up by 48%, albeit on a small base and the net interest margin (NIM) remained at a healthy rate of 4.3%.

Despite these numbers, the stock of RBL Bank cracked sharply by around 14% to Rs.500. This fall was largely triggered by the weak conditions in the market overall as the liquidity concerns were leading to sell-off in private banks, realty and auto stocks. In short, all rate sensitives were getting knocked over despite expectations that rates would be cut in the monetary policy announcement in August. But, there was also a company specific worry for RBL Bank. Although the gross NPAs remained around 1.38% and net NPAs at 0.69%, there was higher spillage and also higher write offs. The spillages in the quarter were up by over 10% at Rs.225 crore while the write-offs were up sharply by 60% at Rs.147 crore. It was this pressure on asset quality that led to a sharp correction in the stock price. Having said that, the stock is surely under pressure and has corrected over 35% in the last few months so it would be better to keep the stock on your watch and wait for the spillages to subside before taking an investment calls on RBL Bank.