DCB Bank Ltd. share price target

We maintain our BUY recommendation on fair valuations.

DCB Bank has reported weaker-than-expected Q1FY25 PAT of INR 1.3bn (up 3% YoY; 5% miss), pulled down by NIM decline and higher opex. Reported RoA declined to 82bps vs 1.0% QoQ and 94bps YoY.

DCB Bank (DCBB) reported 3.5% YoY decline in PAT to INR1.3b (7% miss) in 1QFY25, due to lower net interest income and higher opex.

Operating leverage to drive RoE recovery
DCB Bank (DCBB) has seen a healthy recovery in loan growth over the past two years after reporting tepid trends over FY20-22. The bank continues to focus on granular retail loans, with the share of mortgages rising to 45% from 41% in Mar’22.

Quarterly Update Q4FY24

Recommendation: We revise our rating from HOLD to BUY on fair valuations.

Driven by strong loan growth (up 5% QoQ), NIM uptick (up 14bps QoQ) and contained credit costs (driven by negligible net slippages), DCB Bank (DCB) reported higher-than-expected Q4FY24 PAT of INR 1.56bn with RoA of 1.02%. We believe DCB will likely continue delivering strongly on loan and deposits growth, at ~16–17% CAGR, for FY24–26E

Margin expansion and strong fee income counter-balanced opex, which
led to ~10% sequential growth in DCB Bank’s Q4 operating profit.