DCB Bank Ltd. share price target

DCB Bank reported weak Q2FY21 results with controlled opex being the only silver lining. Muted business growth and elevated provisioning were the laggards, which impacted overall PAT. Provision surged 161.4% to | 113.1 crore (~45 bps of advances), including Covid related provisioning of | 48 crore. Total Covid provisioning as of September 2020 was at | 143 crore (~57 bps of advances). In addition, the bank has additional floating provisions of | 103 crore. This translates into total contingent provisioning of ~160 bps as on Q2FY21. Slippages were...

DCB Bank's 2QFY21 earnings demonstrated sequentially higher provisioning expenses (1,131mn v/s 837mn in 1QFY21) and net profit of 823mn; up by 3.7% sequentially. The headline PCR increased sequentially to 79.1% as fresh slippages remain insignificant. The bank's total slippages number remains minuscule (90mn v/s 52mn in 1QFY21), higher write-offs (284mn v/s 66mn in 1QFY21) and muted advance growth have resulted in GNPA ratio (2.27% v/s 2.24% in the previous quarter) and decline in NNPA ratio (0.83% v/s 0.99%). On the business front, the bank reported muted growth in net advances (de-growth of 0.7% QoQ) and lackluster deposit traction of -2.2% QoQ. Gold loans grew at a healthy pace of 42% sequentially. The collection efficiencies of the bank...

DCB Bank (DCBB) reported strong operating profits, aided by margin expansion and controlled opex. However, business growth moderated in both loans and deposits. The management has further guided for loan...

DCB Bank's (DCBB) Q2FY21 PAT at Rs 0.8bn was in line with estimates.

Quick Research Note

Key takeaways from our recent interaction with the DCB Bank (DCBB) management.

DCB Bank's asset quality remains stable as standstill benefit led to lower slippages during the quarter. Bank's credit growth further slowed down to 4% vs 8% (FY20). NII grew by 1% YoY while PAT de-grew by 2% YoY led by higher provisions (up 105% YoY; Rs.320mn for Covid-19 provisions). Cost-to-income ratio on a QoQ basis has declined by 81bps to 50.3% on account of decline in Opex sequentially. Bank reported 26%book under moratorium which declined from 60% under phase 1. Management guidance for upto 5% decline in the Advances has made us revise the estimates on credit growth at -5% for FY21...

Provision surged 106% YoY to | 84 crore, including Covid related provisioning of | 32 crore. Total Covid provisioning as on June 2020 was at | 95 crore i.e 40 bps of advances. In addition, the bank has additional floating provisions of | 99 crore i.e ~0.4% of advances. PCR was at ~75.2% against 70.8% in Q4FY20. Slippages were lower at | 5.2 crore, on the back of standstill asset classification. GNPA and NNPA ratio declined 2 bps and 17 bps QoQ to 2.44% and 0.99%, respectively. Advances growth saw continued deceleration to 4.2% YoY to | 25058 crore...

DCB Bank's (DCBB) Q1FY21 PAT at Rs 0.8bn (2% YoY) was hit by muted NII growth and a 29% QoQ drop in non-interest income.

DCB reported advance degrowth of 0.37% for Q4FY20 on a QOQ basis while deposits registered a QOQ growth of 2.14%, even though Q4 usually has historically been the strongest quarter for the bank. NIMS for the quarter stood at 3.64% against 3.71% in Q3FY20. GNPA's stood at 2.46% against 2.20% in Q3FY20 while NNPA stood at 1.16% against 1.03% in Q3FY20. The provision coverage ratio was at 70.81% against 76.99% in Q3FY20. Advances growth to pick up pace from Q3FY21 as COVID induced pain eases and the economy returns to normalcy. GNPA's increase - upgrades delayed On a QOQ basis GNPA'S registered an increase of INR 795 mn as upgrades were affected by the lockdown. Within GNPA's the highest...