DCB Bank's asset quality deteriorates as GNPA stood at 4.1% versus 3.7% QoQ and NNPA at 2.3% versus 1.92% QoQ. Gross restructured book stands at Rs10.9bn (4.2% of advances) in line with guided range of 3%-5% of book. Bank’s credit growth improved to 2% YoY as against -0.5% YoY (Q3FY21) while deposits continue to decline; de-grew by 2% YoY. NII de-grew by 4% YoY led by decline in margins. PAT grew by 13% YoY led by lower provisions (down 14% YoY; Rs.1.24bn for Covid-19 provisions). Cost-to-income ratio on a QoQ basis has increased by 1058bps to 54% sequentially.
Bank reported collection efficiency for key portfolios (Mar’21) -LAP/Home loans/CV loans at 95.2%/96.8%/86% versus 89.8%/94.1%/ 80.4% (Dec’20) respectively. However, Customer paid 3 EMI or more in LAP/Home loans/CV loans stands at 97.4%/95.0%/ 94.6% respectively.
Commenting on the result review, IDBI Capital said, "We revised our estimates downwards due to lower PCR and re-iterate our rating to 'Accumulate' with new TP of Rs.104 (earlier Rs.125) valuing it at 0.9x P/ABV FY23.
Key Highlights and Investment Rationale
Credit growth improved; Deposits growth remains negative: Loan growth on the overall book stands at 2% YoY vs -0.5% YoY (Q3FY21). While growth ex-corporate segment is at 3.6% YoY. Its core segment Mortgage has grown by 2.4% while SME segment declined by 7% YoY due to cautious approach. AIB book grew by 7% YoY (0.5% YoY Q3FY21); however Corporate segment continuous to de-grow (down 6%YoY). Overall, Bank will head up the sales by Mar-April and increase headcounts in Mortgages and Home loans while expects to grow at mid-teens in FY22. Deposits declined by 2% YoY led by declined in inter-bank term deposits.
Asset quality deteriorates; Restructuring book at 4%- :Gross restructured book stood at Rs 10.9 billion (4.2% of advances) largely from Mortgages, CV and SME/MSME in line with guided range for 3-5% of book. Bank GNPA worsens to 4.1% versus 3.8% QoQ and NNPA at 2.3% vs 1.9% QoQ. Gross slippages (including Proforma) stood at Rs 6.64 billion and holds lower PCR at 45% (excluding tech w/offs). Apart from this bank hold provisions of Rs 2.33 billion (0.9% of advances) which provides cushion on P&L. We need to watch out for slippages from restructured book.
NIMs declined QoQ; Cost to income ratio increased: Margins declined on sequential basis led by interest reversal of Rs.370 million and reduction of Rs.100 million from interest income due to interest on interest. Cost to income ratio continues to decline from highs of 57% in FY19 to 43% in Q3FY21, however increased to 54% in Q4FY21 as operating expenses increased by 13% QoQ.
Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.