The interest of overseas banks in mid-sized Indian banks is clearly visible with the recent takeover offer by Dubai-based Emirates NBD for RBL Bank. The valuations attributed to the Indian mid-sized banks by overseas players appear reasonable and broadly reflect the position of the respective Indian entity in the local banking system.
Emirates NBD will invest in a preferential offer to gain up to 60 % stake in RBL Bank at Rs 280 per share. In addition, there is an open offer at Rs 280 per share. This acquisition has been done at about 1.1 times RBL Bank’s book value for FY 25. It is understood that Emirates NBD will invest up to $ 3 billion to gain up to 60 % stake in RBL Bank.
And Japan-based SMBC had also acquired a 24.2% stake in Yes Bank at the end of the September 2025 quarter. This stake had been acquired via multiple purchase transactions and had been done at about 1.3 to 1.4 times Yes Bank’s book value for FY25.
Other mid-sized banks like Federal Bank, at Thursday’s intra-day price of Rs 229.55, trades at about 1.7 times its book value for FY25. And IDFC First Bank at Rs 79 on intra-day Thursday trade, trades at about 1.5 times its book value for FY25.
The Q2 scorecard: NIM pressure and growth divergence
For a key operational parameter, net interest margin (NIM) for RBL Bank it was 4.51 % in the September quarter vis-a-vis 5.04 % a year earlier.
Rival, Federal Bank’s NIM was 3.06 % in the second quarter of FY26 vis-a-vis 3.12 % a year earlier. In the case of IDFC First Bank, its NIM was 5.59 % in the September 2025 quarter, a fall of 59 basis points on a y-o-y basis.
And for Yes Bank, it has highlighted NIM of 2.5% in the September 2025 quarter vis-à-vis 2.4% a year earlier
The central bank had cut repo rates in its meeting in early June 2025, and while interest rates on bank loans / credit facilities have come down, interest rates on deposits with the bank come down with a lag. This had caused a temporary fall in NIMs for several banks.
Meanwhile, RBL Bank had grown its advances by nearly 15 % y-o-y to Rs 1 lakh crore in the September 2025 quarter, and it had benefited from strong demand for commercial banking along with auto loans and housing loans in the quarter under review.
And Federal Bank grew its advances by nearly 6.1% y-o-y to Rs 2.44 lakh crore in the September 2025 quarter, helped by strong demand for gold loans and supply chain finance advances. In the case of IDFC First Bank, its advances were Rs 2.57 lakh crore in the September 2025 quarter, a growth of nearly 19.5% on a y-o-y basis. The bank benefited from strong demand for vehicle loans, education loans, and gold loans.
For Yes Bank, its advances were Rs 2.5 lakh crore, a growth of 6.4% y-o-y in the September 2025 quarter
Profitability Split: How provisioning changed the game
RBL Bank’s provisions were Rs 499.7 crore in the September 2025 quarter vis-a-vis Rs 618.3 crore a year earlier. Its net NPA % was 0.57 % in the second quarter of FY26 vis-a-vis 0.79 % a year earlier. However, RBL Bank’s cost-to-income ratio was 70.7 % in the second quarter of FY26 vis-a-vis 64.2 % a year earlier. As a result, RBL Bank’s standalone net profit fell nearly 19.8 % y-o-y to Rs 178.5 crore in the September 2025 quarter.
In contrast, Federal Bank in the September 2025 quarter has made provisions of Rs 363 crore vis-a-vis Rs 158.3 crore a year earlier. Federal Bank has pointed to a loan loss of Rs 306 crore in the September 2025 quarter. Its percentage of net NPA was 0.48% in the September 2025 quarter vis-a-vis 0.57 % a year earlier. Higher provisioning resulted in Federal Bank’s standalone net profit at Rs 955.3 crore in the September 2025 quarter, a fall of nearly 9.5 % on a y-o-y basis.
And for IDFC First Bank its provisions at Rs 1,451.9 crore in the September 2025 quarter, fell by nearly 16% on a y-o-y basis. Its percentage of net NPAs to net advances was 0.52 % in the September 2025 quarter vis-a-vis 0.48 % a year earlier.
Lower provisioning helped IDFC First Bank’s standalone net profit rise 76% y-o-y to Rs 352.3 crore in the September 2025 quarter.
For Yes Bank, its provisions were Rs 419 crore in the September 2025 quarter vis-à-vis Rs 297 crore a year earlier. Its % of net NPA was 0.3% in the second quarter of FY26 vis-à-vis 0.5 % a year earlier. Nevertheless, its growth-oriented approach helped Yes Bank standalone net profit rise 18.3 % y-o-y to Rs 654.47 crore.
What Next? M&A impact and future strategy
Investors on Dalal Street will be closely monitoring the growth strategy of RBL Bank and Yes Bank, with the overseas bank expected to play a bigger role in the growth strategy of the respective Indian entity, over the next few quarters.
For RBL Bank, the preferential allotment is expected to result in an increase in its net worth from more than Rs 15,000 crore to more than Rs 42,000 crore and it would help the bank to substantially increase its branch network from 564 at the end of the September 2025 quarter. Investors will also be monitoring the ability of RBL Bank to manage its cost structure over the next few quarters as it attempts to get a bigger share of the Indian banking system.
The above development comes at a time when the RBI has taken several measures to boost lending in the broader banking system. And with the recent cut in GST on most products, demand for credit is expected to pick up in the current busy season.
Valuations
RBL Bank was at Rs 317 during intra-day Thursday trade and it appears unlikely that existing shareholders will tender their shares in the open offer at Rs 280 per share. RBL Bank trades at more than 25 times estimated standalone FY26 earnings and Yes Bank trades at a P/E of more than 20 times.
Federal Banks trades at a P/E of 15 times its estimated standalone FY26 earnings while IDFC First Bank trades at a P/E of more than 30 times its estimated standalone FY26 earnings.
Clearly, it would seem, mid-cap bank stocks have broadly factored in the growth opportunities in the short-term.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family have no shareholding in any of the stocks mentioned in the article.
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