RBL Bank Ltd Valuation Shifts to Very Expensive Amid Strong Market Returns

Valuation Metrics and Recent Grade Upgrade

As of 20 Feb 2026, RBL Bank’s P/E ratio stands at 31.06, a marked increase that places it firmly in the "very expensive" category according to MarketsMOJO’s valuation grading system. This is a notable jump from its previous valuation grade of "expensive," reflecting a re-rating of the stock by investors. The P/BV ratio at 1.30, while moderate, also supports this elevated valuation status. The bank’s PEG ratio remains at 0.00, indicating either zero or negligible earnings growth expectations factored into the price, which may warrant closer scrutiny.

These valuation changes coincide with a recent upgrade in the stock’s Mojo Grade from "Sell" to "Hold" on 5 Jan 2026, with a current Mojo Score of 64.0. The Market Cap Grade remains modest at 3, reflecting its mid-tier market capitalisation within the private sector banking space.

Stock Price Performance Versus Sensex

RBL Bank’s share price closed at ₹332.60 on 20 Feb 2026, up 1.98% on the day, with a 52-week high of ₹340.30 and a low of ₹149.10. The stock has demonstrated remarkable resilience and growth over various time frames. Year-to-date, it has gained 5.37%, outperforming the Sensex which declined by 3.19% over the same period. Over the past year, RBL Bank’s return has been an impressive 106.33%, vastly outstripping the Sensex’s 8.64% gain. Even on a three-year horizon, the stock has more than tripled, delivering a 109.71% return compared to the Sensex’s 35.24%.

This strong price momentum has contributed to the elevated valuation multiples, as investors have rewarded the bank’s growth prospects despite some underlying concerns.

Comparative Valuation Within the Private Sector Banking Industry

When benchmarked against its peers, RBL Bank’s valuation appears stretched. For instance, Karur Vysya Bank, also rated "Very Expensive," trades at a P/E of 13.43 and an EV/EBITDA of 14.81, significantly lower than RBL’s P/E. Bandhan Bank, rated "Expensive," has a P/E of 27.09, while City Union Bank trades at a more moderate 16.81 P/E. Several other banks such as Tamilnad Mercantile Bank and South Indian Bank are classified as "Very Attractive," with P/E ratios below 9, highlighting the premium investors are paying for RBL Bank’s shares.

RBL Bank’s P/BV of 1.30 is also higher than many peers, though not excessively so. However, the bank’s return on equity (ROE) of 4.17% and return on assets (ROA) of 0.43% are relatively modest, suggesting that the elevated valuation is not fully supported by superior profitability metrics. Additionally, the net non-performing assets (NPA) to book value ratio stands at 3.58%, indicating some asset quality challenges that investors should consider.

Fundamental Performance and Risk Considerations

Despite the strong price appreciation, RBL Bank’s fundamental performance remains mixed. The low dividend yield of 0.30% reflects a conservative payout policy, possibly aimed at retaining capital for growth or provisioning. The bank’s ROE and ROA figures are below industry averages, which may temper enthusiasm for the current valuation levels.

Moreover, the net NPA ratio signals ongoing credit quality risks, which could weigh on earnings and investor sentiment if not addressed effectively. These factors contribute to the cautious "Hold" rating, despite the recent upgrade from "Sell."

Investor Takeaway: Valuation Versus Growth Prospects

RBL Bank’s valuation shift to "very expensive" reflects investor optimism about its growth trajectory and market positioning within the private sector banking segment. The stock’s exceptional returns over the past year and three years underscore this confidence. However, the elevated P/E multiple, when contrasted with moderate profitability and asset quality concerns, suggests that the stock may be priced for perfection.

Investors should weigh the potential for continued earnings growth against the risk of valuation correction, especially given the availability of more attractively valued peers in the sector. The current Mojo Grade of "Hold" aligns with this balanced view, signalling neither a strong buy nor a sell recommendation at present.

Historical Context and Market Sentiment

Looking back over a five-year horizon, RBL Bank’s total return of 34.98% lags behind the Sensex’s 62.11%, indicating that the recent rally has been a catch-up phase rather than a continuation of long-term outperformance. The absence of data for a 10-year return further emphasises the bank’s relatively recent emergence as a market favourite.

The stock’s volatility is also evident in its wide 52-week price range from ₹149.10 to ₹340.30, reflecting changing investor sentiment and market dynamics. The recent upward momentum, including a 4.9% gain in the past week, suggests renewed interest, possibly driven by improving macroeconomic conditions or sectoral tailwinds.

Conclusion: A Cautious Approach Recommended

RBL Bank Ltd’s transition to a "very expensive" valuation grade highlights the market’s bullish stance on its prospects but also raises caution flags for investors. While the stock has delivered stellar returns recently, its elevated P/E ratio, modest profitability, and asset quality concerns suggest that the current price may already factor in significant growth expectations.

Investors should consider the broader industry context, peer valuations, and fundamental metrics before committing fresh capital. The "Hold" Mojo Grade reflects this nuanced outlook, recommending a balanced approach that monitors upcoming earnings and credit trends closely.

For those seeking exposure to the private sector banking space, a comparative analysis of alternatives with more attractive valuations and stronger fundamentals may be prudent.

Only Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Start Today