Dinesh - thanks for your note. A few points here. The Vision 2020 wasn’t something invented now. They have had it in their presentations in quantified format (30-35% Cagr etc) since Q2 FY17. See here: https://ir.rblbank.com/pdfs/financial-highlights/Investor_Presentation_Q2_FY17.pdf
Second, This concept of financing profit is incorrect, IMHO. (there’s no concept of EBIDTA in a bank - you have to take out interest, but anyhow) For instance 2016 was other income of 491 cr. (correct) but where did the 477 cr. number come from? It might be that you are considering that all costs for the bank relate to only the financing business- which is not true. From trading, to fees, to card costs etc. there are substantial costs related to fee income only, which therefore should not be conflated with the financing costs (even part of branch costs are fee income related).
Third, income from investments is required to be noted as interest income. You as a bank are reuqired to put 20% of your deposits in govt bonds. This generates income from investments. If you remove that, you should remove the 20% of interest paid on deposits as well, which is not really the right thing to do. The interbank and RBI interest isn’t much - just 70 cr.
Fourth, you don’t look at a fund raise as % of equity or reserves. You look at it as primarily about how much it will dilute the bank’s equity, and how much it will change the basel capital ratios and for how long. The dilution is not 50% or anywhere close to it. If anything, it might be 10%, and yes, it will substantially reduce RoE until they get to use the capital properly.
Q1 provisions are higher, perhaps and that’s good - the point is to provide high enough to cover for NPAs, or even higher. (Also note that income is up 50%, PBT is up 50% and so on - so it’s not unusual to see a provisioning also go up at the same rate)
It’s useless to defend a bank’s numbers. They can invent what they want. HDFC doesn’t generate a 20% profit growth yoy every single quarter without some kind of change they have power to do. In the end, like you said, it’s about your trust in bank management. But I would like to debunk any mentions that seem incorrect in my opinion, even if it may not change anyone’s view on the stock or the bank.
