DCB Bank's loan growth on the overall book came at -0.5% versus 0.3% YoY while growth ex-corporate segment stood at 0.6% YoY. Its core segment Mortgage has grown by 2% while SME segment declined by 0.5% YoY due to cautious approach. AIB book declined by 0.5% YoY; however Corporate segment continuous to de-grow (down 8.8%YoY). Overall, Bank will head up the sales by Mar-April and increase headcounts in Mortgages and Home loans while expects to grow at double digit in FY22. Deposits declined by 3% YoY led by declined in inter-bank term deposits.
Bank's asset quality deteriorated- Restructuring book at 3%- Net restructured book stood at Rs 6.87 billion (2.7% of advances) largely from Mortgages, CV and SME/MSME while guided for 3-5% of book. Bank Proforma GNPA worsens to 3.70% vs 2.39% QoQ and NNPA at 1.92% vs 0.83% QoQ. Gross slippages (Proforma) stood at Rs 4.48 billion and holds provisions of Rs 1.14 billion (25%) against that. Apart from this bank hold provisions of Rs 5.19 billion (2.05% of advances) which provides cushion on P&L. We need to watch out for slippages from restructured book, said IDBI Capital.
Margins remain stable at 3.75 (3.74% QoQ) as decline in cost of funds was compensated by decline in yields (led by interest reversal). Cost to income ratio continues to decline from highs of 57% in FY19 to 43% in Q3FY21 as operating expenses declined 6% YoY.
Commenting on the result review, the broking firm IDBI Capital said, "DCB Bank's asset quality worsens as Proforma GNPA stood at 3.70% versus 2.39% (Q2FY21) and NNPA at 1.92% versus 0.83% QoQ. Net restructured book stands at Rs 6.87 billion (2.7% of advances) while company expects 3%-5% of book to get restructure. Bank’s credit and deposit growth Continues to slow down at -0.5% (0.3% in Q2FY21) and -2.9% (-2% in Q2FY21) respectively. NII grew by 3.6% YoY while PAT de-grew by 0.5% YoY led by higher provisions (up 150% YoY; Rs.2.29 billion for Covid-19 provisions)."
"Cost-to-income ratio on a QoQ basis has declined by 1106bps to 43.3% sequentially. Bank reported collection efficiency for key portfolios (Dec’20) - LAP/Home loans/CV loans at 89.8%/94.1%/80.4% versus 87.5%/91.3%/ 77.1% (Sep’20) respectively.
However, Customer paid 3 EMI or more in LAP/Home loans/CV loans stands at 92.9%/93.3%/ 86.5% respectively.
IDBI Capital re-iterates its rating to 'Accumulate' with new TP of Rs.125 (earlier Rs.88) valuing it at 0.9x (earlier 0.7x) P/ABV FY23 as revival in the economy is better than expected.
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