DCB Bank Ltd. share price target

DCB Bank (DCBB) reported PPoP growth of 23% YoY (12% beat), as the 7%beat on total income was offset by the 4% miss on opex. NII growth of 20%YoY was led by 29% loan growth, while other income rose 33% YoY (39% YoY core fee income growth led to a 16% other income beat). 4QFY18 NII included INR26.2m from interest on tax refund. Cost-to-core income ratio stood at 60.1%, the lowest since 4QFY16.Provisions at INR388m (+14% YoY) were in line, while higher-than-expected taxes partly offset the PPoP beat, resulting in PAT (INR642m, +21% YoY)exceeding our estimate by 12%

Sector: Banking /Mid-Cap | Earnings Update 3QFY18 Background: DCB Bank Limited (formerly Development Credit Bank Limited) has a deposit base of INR 213 bn and advances of INR186 bn at the end 3QFY18, making it the smallest bank in the listed private sector space, including both new and old generation private sector banks. Promoter group the Aga Khan Fund for Economic Development (AKFED) & Platinum Jubilee Investments holds ~15% stake. DCB services entails Corporate Banking - 17%, SME -12%, Agriculture 17%, Mortgages ...

Maintain BUY with a TP of Rs 218 (2.3x Dec-19 ABV of Rs 95). DCBBs 3Q results were a mixed bag. Though growth picked up (+28% YoY) and profitability sustained, asset quality deterioration blemished the show as slippages (~2.3% ann.) stood at a 11-qtr high. However, GNPA accretion was curtailed by higher reductions (+22% QoQ). NIMs (4.12%, down 10bps QoQ) dipped as yield pressure continued. The jump in PCR (+140bps QoQ to 73.4%) and robust fees (+41% YoY) were key positives.

ICICI Securities Ltd | Retail Equity Research DCB Bank's Q3FY18 performance remained steady with healthy traction in business growth and profitability Led by healthy credit growth, NIM expansion of 17 bps and | 4.5 crore of income tax refund, NII growth remained healthy at 20% YoY to | 250 crore. Other income growth remained strong despite lower treasury gains, due to robust traction of 41% YoY in core fee income Bottomline growth was healthy at | 57 crore (up 11% YoY), below...

The Bank focuses on increasing loan book in low-ticket Retail, SME & AIB segments and augmenting its footprint both on physical and digital front. Despite near-term impact of this aggressive expansion strategy on return ratios, it is beneficial in the long-term, in our view. Further, the Management focuses on increasing efficiency of existing network to improve cost to income ratio in the long-term, which will lead to sustained earnings growth. We expect further improvement in Bank's performance due to GST roll-out, as creditworthiness of its core client group from SME/MSME segment will improve substantially. Introducing our estimates for FY20E, we expect earnings growth to gain momentum leading to improvement in RoA and RoE...

DCB Bank (DCBB) reported PPoP growth of 12% YoY (1% above estimate), as 8% beat on total income was offset by 23% growth in opex. NII growth of 20% YoY was led by 17bp expansion in reported NIM, while other income grew 17% YoY (core fee income increased 41% YoY). However, total income growth trailed opex growth (+20% YoY adjusted for INR50m of bond issue-related expenses). Adjusted for the one-off expense, the CI ratio stood at 60.8% compared to 60.3% in 2Q and 57.2% in 1Q. Provisions at INR343m (+12% YoY) were 4% below estimate, while higher-than-expected taxes resulted in PAT of INR570m (+11% YoY, 5% miss). Strong growth in corporate (+35%), MSME (+39%) and AIB (+28%) books led to 7%/28% QoQ/YoY growth in loan book to INR186b. Other smaller categories such as CV/CE (+59%), gold (+28%) and construction finance (+91%) also showed strong growth.

We upgrade DCB Bank (DCBB) to BUY (Hold earlier) with TP at Rs215. Q3'18 results were in-line with our estimates on both revenue / earnings front. Loan growth has gathered pace (7% QoQ / 28% YoY) - an outcome of a) improvement in core SME, retail segment and b) better branch productivity. Acceleration therein will aid in curtailing overall cost/income ratio lower. While Q3'18 slippages were a tad higher (2.2% of loans), we expect normalisation therein; trend in recovery / upgrade remains solid and is an added comfort. We expect return ratios - RoA / RoE to inch towards...

DCB Bank has strategically diversified its loan portfolio across retail, MSME, SME and corporates with increased focus on secured lending. DCB's asset quality has improved significantly from gross NPA levels of 9.7% in FY10 to 1.6% in FY17 which has aided profitability growth. It's net interest margin has also improved by 120bps over FY10-FY17 to 4% on the back of increased focus on retail and improvement in asset quality.

Sector: Banking /Mid-Cap | Earnings Update 2QFY18 Background: DCB Bank Limited (formerly Development Credit Bank Limited) has a deposit base of INR 206 bn and advances of INR173 bn at the end 2QFY18, making it the smallest bank in the listed private sector space, including both new and old generation private sector banks. Promoter group the Aga Khan Fund for Economic Development (AKFED) & Platinum Jubilee Investments holds ~15.01% stake. DCB services entails Corporate Banking - 17%, SME -12%, Agriculture 17%, Mortgages ...